Phillip Morris International to Return $9B in ’09

• Posted by ToddSullivan
• on June 26th, 2009

Received Phillip Morris International (PM) shares from Altria in last years spinoff. Due to the deteriorating US legal environment for tobacco recently, I sold my long time holding Altria (MO) in December and now only still hold PM shares.

I consider PM the company of the two with better longer term prospects and business environment.

One overlooked investment thesis for PM is that it is a hedge against the general devaluation of the US dollar. PM sells tobacco in other nations in their local currencies, it then convert those currencies to US dollars for reporting purposes. As the dollar falls in value, those conversions yield more dollars for shareholders.

For those who do not want to go through the whole presentation, slide 67 is the applicable slide. The comments were:

In August last year, we raised our dividend by 17.4% to an annualized rate of $2.16 per share and we have confirmed our willingness to exceed our target 65% dividend payout ratio in 2009. At the current stock price, our dividend provides an attractive yield of approximately 5.2%.

We have completed over half the $13 billion two year share repurchase program that we initiated in May 2008 and are one of the few major companies in the world to have maintained their share repurchase program throughout the current financial crisis.

All in all we expect to return some $9 billion in cash to our shareholders during 2009.

So we have a 5% dividend yield and a company growing earnings 10-12% annually. Based on that earnings growth, we should see a dividend next year or $2.43 a share for a current yield of 5.7%. PM did say they may consider exceeding that (65% of earnings) this year which would boost it higher.

Phillip Morris International

Disclosure (“none” means no position):Long PM

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