Is Philip Morris Rewarding its Investors Enough?




On December 7, 2016, Philip Morris International (PM) announced dividends of $1.04 per common share for 4Q16, equal to its 3Q16 dividends. The 4Q16 dividend took dividends for 2016 to $4.12, which represents a growth of 2% from 2015.


Analysts expect Philip Morris to pay dividends of $4.20 in 2017, which represents a growth of 2% from 2016. Dividends are important for investors as they smoothen out return volatility.

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Dividend yield

In 2016, PM paid dividends at a yield of 4.6%. In 2017, analysts expect the company to pay dividends at a yield of 4.5%. A company’s dividend yield indicates how much the company pays out in dividends each year relative to its share price.

Capital reallocation

In addition to paying dividends, Philip Morris rewards its shareholders with share repurchases. In August 2012, the company authorized a three-year repurchase program of $18 billion, which began on August 1, 2012. Between August 1, 2012, and December 31, 2014, the company repurchased 144.6 million shares at a cost of $12.7 billion. After three years, in August 2015, the repurchase program expired. The company did not repurchase any shares in 2015 under this program. Later on, on February 4, 2016, the company announced that it has no plans of share repurchases in 2016.

You can gain exposure to Philip Morris by investing in the Consumer Staples Select Sector SPDR ETF (XLP), which has invested 7.9% of its holdings in PM. XLP has also invested 6.7% and 3% of its holdings in Altria Group (MO) and Reynolds American (RAI), respectively. Next, we’ll look at Philip Morris’s valuation multiple.


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