Philip Morris Raises Dividend Nicely

Source from:  Tobacco World  09/27/2012

The next day, many investors were waiting here. No, I'm not talking about the release of iPhone. I'm talking about the dividend increase we expected from Philip Morris. On Wednesday morning, Philip Morris announced that it is raising its quarterly dividend. Despite the news, the shares have been sold, and that provides an excellent opportunity for long term investors to enter.

Now I have detailed in the past, I was expecting to raise about $ 0.85 for the quarter, and that's exactly what we got. This is 10.4%, and means that Philip Morris will now pay $ 3.40 per year in dividends. This is in addition to about $ 6 billion; they will buy back the shares each year for the next several years. The dividend will be paid on October 11 to shareholders of record as of September 27. The ex-dividend date is September 25th.

Baed on Wednesday's close, Philip Morris is now yielding 3.92%. This puts it in a line with other celebrities' cigarette, and, as I said, Philip Morris has a huge ransom as well. Currently Altria brings 5,29%, Lorillard brings 5.36%, and Reynolds American brings 5.46%. These outputs are a little from recent levels, and these names were down slightly last week. Lorillard fell more than 4% on Wednesday alone.

Now, just last week, I said that the Philip Morris approaching the sweet spot. By that I mean, he came down with an attractive entry point for investors. At the time, Philip Morris went down by more than $ 4 from its recent high of $ 93.60. I said that the best entry price based on the expected income in 2013 was $ 84.81. At that point, I had not seen these names down so much, so I urged investors to start to write the names of about $ 87.84, if they get a chance. Philip Morris closed Wednesday at $ 86.67, so it's mostly in my lap now. If the markets do not like the Fed's decision on Thursday, it's possible that we could see, down from $ 85.

Now Philip Morris is still trading at a premium to the other in the space, including British American Tobacco. The following table shows the price and earnings estimates for each based on the current expected earnings for each year.

Now, I noted that Philip Morris traded at a premium to those other names for a while now. Dividend increase today reduced the premium a bit, so you get an additional 32 cents a year. As I noted in my last article, Philip Morris is near the top of the industry when it comes to growth expectations for this year and next. Add that in with the nearly 4% dividend and repurchase billions and you can see why this stock is an investor favorite.

Wednesday's news that Philip Morris was increasing its dividend was not surprising, and the dividend raise was right where I thought it would be. Philip Morris now gives 3.92%, a big jump from 3.29% we saw recently at the 52-week high. Philip Morris remains strong, and the dividend increase this week proves this fact. Philip Morris investors will celebrate this growth, while other investors can now decide whether it is right there for them. The stock is moved away from the high $ 7, and it provides an attractive opportunity to enter, however, investors could get more opportunities in the next few days, if the Federal Reserve does not disappoint. Enditem