Billionaire investor Stanley Druckenmiller, known for his stellar record of delivering 30% annual returns without a single loss year for his clients, has recently made waves in the financial world by adding a notable stock to his investment portfolio. His choice? Philip Morris International (NYSE: PM), a growing player in an industry often viewed skeptically due to declining cigarette use.
Despite the ongoing debate around tobacco stocks, Philip Morris is charting a new course by focusing on innovative nicotine products, significantly shifting the narrative surrounding its viability as an investment. With the company recently disclosing a new position in its family office, Druckenmiller’s endorsement is a strong signal to investors about the potential this stock still holds.
As we dive deeper into Philip Morris’ strategic shift, it’s important to note that the company has expanded its product lineup to include heat-not-burn products like Iqos and nicotine pouches such as Zyn. These innovations have captured the interest of millions, with over 36 million active users engaging with their smoke-free options. Revenue from these new-age products has allowed Philip Morris to stabilize and even grow its shipment volumes, with smoke-free gross profits soaring by 22.2% year over year.
Investors are taking note, especially as Philip Morris continues to deliver impressive returns. While the stock has enjoyed a remarkable year-to-date gain of 36%, it still offers a compelling dividend yield. The company boasts a dividend yield of 4.1%, which remains attractive compared to the current yield of the 10-year U.S. Treasury at 3.6%.
Another key aspect to consider is Philip Morris’ projected earnings per share (EPS). The company anticipates reaching earnings around $6 per share for 2024, which would mark a significant increase from $5.02 in 2023, setting them on a path to their highest earnings ever. This upward trend in earnings is crucial, as it directly impacts Philip Morris’ ability to maintain and grow its dividend payouts.
Recently, the company declared a dividend increase to $1.35 per share quarterly, translating to an annual payment of $5.40. This adjustment indicates confidence in its future profitability and provides reassurance for dividend-focused investors who prioritize consistent and growing income streams.
Despite the stock’s recent rise, some experts argue that Philip Morris remains undervalued. With the company’s EPS poised to increase and further room for dividend growth, savvy investors could see the stock as an appealing addition to their portfolios. The possibilities become even more intriguing when you consider projections that the EPS could reach $10 in the coming years, leading to a prospective annual dividend of $9. This scenario would create an astounding forward yield of around 7.1% based on the current stock price.
In conclusion, while the investment landscape shifts continuously, the evolving focus of Philip Morris International on nicotine alternatives positions it uniquely for future growth. For those contemplating whether to invest $1,000 in Philip Morris, it’s crucial to evaluate the long-term potential alongside the insights of industry influencers like Druckenmiller.
However, it’s worth noting that investing in any stock, including Philip Morris, carries risks, and one should always conduct thorough research or consult a financial advisor before making investment decisions. With the stock’s current trajectory and the underlying industry shifts, Philip Morris International might just be the investment opportunity that stands out for those in search of robust dividend growth in the future.