Philip Morris: dividend increase a sign of tobacco’s resilience under COVID? – The Armchair Trader

Philip Morris: dividend increase a sign of tobacco’s resilience under COVID? – The Armchair Trader

Tobacco companies, despite the many headwinds they face, continue to be popular with medium- to long-term investors looking for dividends.

An increasingly health-conscious public, mounting regulatory pressures and a fall in duty-free sales caused by the Covid pandemic are all factors that have forced tobacco companies to stay as efficient as possible, cutting costs wherever possible, looking for synergies through mergers with rivals and diversifying into the so-called Next Generation Products to meet the growing demand for less harmful forms of smoking.

Philip Morris International (NYSE:PM) opened trading on 12/11/20 at $74.61, representing a 4% increase over the week, though still well below its fair value of $128.54. The stock is 13.39% down year to date, but has been on an upward trend throughout the period and is now midway on its 52-week range. It has posted a one-year return of -10.2%, which compares favourably with the US tobacco sector’s -14.8%, though well below the US market’s 18.7%.

Philip Morris International: better than expected Q3

Philip Morris International had a better than expected third quarter. Net revenue was down only 2.6% to $7.45bn year-on-year, operating income edged up 1.9% to $3.24bn and the adjusted earnings per share for the quarter was $1.42, beating analyst forecasts of $1.36.

For the nine months to the end of September, pre-tax earnings were up 9.4% to $8.24bn. Analysts are forecasting growth of an average of 8.5% per year for the next three years, though again this is less than for the US market (21.5%). The current
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