Philip Morris International Delivers on 10% Dividend Hike

As expected, Philip Morris International Inc. (NYSE: PM) has increased its dividend. We pegged former parent Altria Group Inc. (NYSE: MO) as a dividend hike candidate in August and that came about. Here is a list of the 11 other dividend hikes we expect before the end of 2012.

Today’s dividend increase takes the regular quarterly dividend up by 10.4% to an annualized rate of $3.40 per share. With an $87.60 share price, the new dividend rate for Philip Morris International’s common stock will be 3.88%. That would be exceptionally low for a domestic tobacco stock, but this is still deemed to be the growth tobacco stock according to analysts and investors. To prove the point, here are some Thomson Reuters sales expectations comparing the years 2011 thru 2013:

• PMI sales: $31.67 billion expected in 2012 for 1.8% growth over 2011, but 2013 sales are expected to rise by 5.5% to $33.41 billion.
• Altria sales: $16.92 billion expected for 2012 for 1.8% growth, but 2013 sales are expected to grow by only 1.5% to $17.17 billion.

We still wonder if the growth expected is enough to justify the dividend discrepancy between the “growth stock” versus the “low-growth dividend stock.” Another problem is that currency fluctuations can greatly influence the Philip Morris International sales, and the Altria story is nearly a full-on domestic story. For that matter, Altria has finally pulled back from the nose-bleed area on market valuations as dividend investors obviously chased it up way too high.

Philip Morris International shares are at $87.60 against a 52-week range of $60.45 to $93.60 and the Thomson Reuters consensus price target is $91.83 from analysts.

JON C. OGG