Philip Morris has almost $8 billion in Cash-back dividends
In the third quarter, the tobacco giant showed revenue of more than $8 billion. There have been no such figures in the PMI report since the end of 2017. A week before publication, Philip Morris (PM) paid its highest—ever quarterly dividend of $1.25 per share.
Considering the recent cashback for the whole year, investors will receive an amount commensurate with the quarterly revenue of the corporation. The main thing is the eighth consecutive quarter when Philip Morris reports better than consensus forecasts in both profit and revenue,
- Despite tobacco bans around the world, tobacco sales are growing, shifting from classic cigarettes to electronic ones,
- The number of IQOS (tobacco vaporizers) users exceeded 20 million people – with the total number of smokers in the world more than 1 billion,
- Tobacco vaporizers, to which demand is switching, give a great return on investment,
- A newly increased dividend (more than 5% per annum) will be paid regularly, while the company has already conducted a round of share repurchase at a price 3% higher than the current market price.
- Revenue for the quarter was $8.12 billion with an expected $7.92 billion, adjusted earnings per share – $1.58 against the consensus of $1.56,
- The company’s forecast for the whole of 2021. earnings per share improved: from $5.76–5.86 to $5.84–5.89, growth about 2020 will be from 13% to 14%,
- With a slight drop (by 0.4%) in cigarette sales, sales of tobacco vaporizers increased by 23.8%,
- In the company’s total revenue, the share of IQOS and other smokeless nicotine delivery vehicles amounted to 28.6%.
- The main drivers of sales of smoking electronics are new markets: eight-fold growth in South Asia, three-fold in the East and Africa, twice in the USA.
Local sorcerers continue to put pressure on revenue, in particular, sales in duty-free stores have, but this effect will gradually go away,
IQOS production cannot meet all demand due to a shortage of chips, and this is also a temporary factor,
The dollar growth plays on the weakening of marginality, a shift in demand for tobacco vaporizers, which gives 43.7% of the operating margin.
Premarket, the quotes moved up by 0.6%, the opening of trading in the US, they turned down, which can serve as a continuation of profit-taking.
Sales began on Monday at the announcement of the report.
Until Monday, the paper was mainly growing, gaining more than 3% in a week.
Now the stock has a forward P/E indicator that is comfortable to buy (=14.6). Technical arrows indicate a slight oversold: the RSI has approached 40. The consensus forecast for Philip Morris suggests a rise above $110 apiece.
By buying a share now, you can fix a handsome dividend above 5% per annum. The following payment will be in December. If you purchase the paper later, then in the coming months, the yield is likely to decline following the growth of the stock itself.
If the stock reaches $110 apiece (which is only 3% higher than the recent September peaks), then the current $5 per share will give only a 4.5% annual return. Moreover, opportunities for further dividend growth have been exhausted so far: Philip Morris already distributes more than 80% of profits to shareholders.
The company firmly holds its market and can confidently continue to increase profitability by selling tobacco electronics.
The shares may reach the target of $110 per share (+15%) in less than a year. The docklike $120 per share (+25%) also looks achievable, but on a longer horizon, up to 2 years. The amount of the dividend, in this case, will range from 4.2 to 5.1% per annum.
