Philip Morris gave investors another dividend increase, but is the stock a buy following a solid 3-month rally?
Philip Morris International (NYSE:PM) recently raised its
dividend. This already high yielding stock has now given shareholders a
dividend increase for more than a decade following its spinoff from Altria
Group Inc. (NYSE:MO). Including when it was part of Altria, the dividend growth
streak expands to more than five decades.
Does this increase and the income the stock provides make
Philip Morris a buy, even following a 15% gain over the last three months? In
this article, we will examine the company's most recent quarter, dividend and
valuation to determine the answer.
Quarterly highlights
Philip Morris reported its second quarter earnings results
on July 21. Revenue declined 13.6% year-over-year to $6.7 billion, but this
wasn't as bad as feared as results were $110 million better than what was
expected by Wall Street analysts. Earnings per share decreased 17 cents, or
11.6%, to $1.29, which was 19 ahead of consensus predictions. Currency, as
usual, was a headwind during the quarter. Revenue was lower by 9.5% and EPS
dropped 7.5% on a currency neutral basis.
Covid-19 had a significant impact on results as consumers
were out and about less during the quarter. Less disposable income in many
regions also played a role in the decline. This was especially pronounced in
urban areas around the world, where Philip Morris has a higher market share.
Volumes for cigarette and heated tobacco declined 14.5%.
Cigarette shipments were down 17.6%. The company's market share fell 10 basis
points to 28%, but much of this was related to continued weakness in Indonesia
and duty free cigarettes.
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