Want a 5% Dividend and Growth? Check Out This Stock
Unlike U.S. government bonds -- which offer investors a stated rate of interest from purchase through their maturity -- a stock that offers a dividend is often expected to grow that dividend over time. In other words, investors are willing to buy a stock with a dividend yield below the low-risk interest rate of U.S. treasuries because they believe that payout can increase in the future.
So, generally speaking, when a stock offers a dividend yield of 5% or higher, which is currently equal to or greater than the rate from most U.S. treasuries, it implies that investors think the business will either grow slowly or not at all. But for Philip Morris International (NYSE: PM), that line of thinking could be misguided. Let's see why.
Philip Morris International is one of the world's largest tobacco companies by revenue. Led by its flagship brand Marlboro, Philip Morris has historically been highly dependent on the sale of cigarettes. However, as the number of cigarette smokers globally has declined over the last several decades, so too has Philip Morris' shipment volume. In fact, over the last 10 years, the company has seen shipment volumes decline by more than 31%. With this shrinking addressable market in mind, management has decided to shift its focus to alternative forms of nicotine consumption, but this time with its eye on lower-risk products.
Source Fool.com
