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Philip Morris International, Inc. Message Board

  • gollywogazoo gollywogazoo Jun 1, 2009 9:28 PM Flag

    peristento ~ take the time to understand

    what is actually presented in a balance sheet - especially what is known as "free cash flow". PMI paid out $5.9 billion (that's right, billion) in dividends to its shareholders since the spin off. Moreover, they spent several billion more buying back stock. Now if you can't understand the fundamentals that would allow an enterprise such as PM to do this, then you have no business buying this equity or any other. Put your money in CDs.

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    • First, free cash flow is not a balance sheet concept. You are doing very little for your ethos here when you condescend to tell someone to take the time to understand, and then make an error like that on the very first line of your post.

      Distributable cash flow is the operational cash minus the maintenance capex. Free cash flow is the operational cash minus all capex.

      Don't cover up the point I am making by saying PM is a money machine or by bragging about the pile of cash they paid out as dividends. Yes, PM has a GREAT business. Yes, PM has HUGE free cash flow. Yes, PM CAN AFFORD a HUGE dividend. I never said otherwise.

      Beyond the dividend which they can pay from free cash flow, what I see clearly on the cash flow statements is that PM is financing a share buyback using money they do not have. They are deliberately incurring huge amounts of debt to make these share buybacks, and in the process of taking on that debt the line on the balance sheet named shareholder equity is decreasing.

      I'm simply trying to understand the dynamics of this and what effect is it having on equity per share (which I did not calculate). I'm pretty sure 70% of all shareholders would never notice such things, and wouldn't care. For those people investing in stocks is more like religion or gambling. I'm simply trying to get a crisp understanding of what looks like a very deliberate strategy to weaken the company's balance sheet.

    • I agree. Phillip Morris Intl= cash cow! Can anyone name a bigger cash cow? Maybe the big banks before they got caught cheating? I would say oil companies can be but they are too dependant on the price of oil. But, in general PM is the King of free cash flow!

 
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