Don't Buy Philip Morris Stock. Here Are 2 Better Dividend Payers To Buy Now
Philip Morris International (NYSE: PM), the overseas tobacco giant spun off from Altria in 2008, is often considered a dependable dividend stock for long-term investors. But over the past five years, PMI's stock actually pulled back nearly 20% and generated a total return of less than 10% after including its reinvested dividends. The S&P 500 generated a total return of nearly 70% during the same period.
PMI underperformed the market because investors believed its business model was becoming unsustainable. For decades, the tobacco industry offset declining smoking rates with price hikes, cost-cutting measures, and buybacks to squeeze steady profits from its sluggish sales growth.
However, PMI suspended its buybacks in 2015 as unfavorable exchange rates made it wasteful to repurchase its shares in U.S. dollars. It struggled to expand as many countries with higher smoking rates passed stiffer anti-smoking regulations, and it faced tough competitive headwinds after British American Tobacco acquired Reynolds American in 2017.
Source Fool.com
