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Philip Morris Remains a Top Pick for Dividend Investors

Philip Morris International Inc. (NYSE:PM) had a volatile 2019. At the start of the year, shares were priced at $70, only to rise above $90 in March. By September, the stock was back to $70, only to approach the $90 mark again toward the end of the year.

Despite the stock price volatility, the company's dividend remained strong. The quarterly payout stood at $1.14 per share until the third quarter, after which it was raised to $1.17 per share. Even after the latest rebound, the dividend still delivers a 5.5% yield.

In total, Phillip Morris has experienced a slight uptrend in revenue and net income over the last 15 years, though fluctuations along the way have consistently caused temporary market panics.


Perhaps most importantly, Phillip Morris has been able to generate billions in free cash flow each and every year, always enough to service its growing dividend. Despite the latest share price drop, the company's free cash flow still outpaces its dividend obligations by nearly $700 million per year.


Sales and net income growth have been a concern for tobacco companies for decades, yet time and time again, these companies have proven to have an ability to overcome these challenges, creating superior risk-adjusted returns for shareholders.

The past decade has been one of the weakest on record for Phillip Morris stock, yet it still achieved double-digit annual returns. With the dividend yield now up to 5.5%, this stock looks like a perfect fit for defensive and income-oriented investors.

Disclosure: Author owns shares of Philip Morris International.

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This article first appeared on GuruFocus.