Stock Idea: Philip Morris International Inc. (PM, $59.00)
(Originally published on February 7, 2011 at www.TheRightHuff.blogspot.com.)
Philip Morris (PM) — Take a deep breath….today we’re discussing a tobacco stock. Gasp! (Or should I say, “cough, cough!”) For me, investing is about making money. And while I work on “saving the world” every day, I don’t do it with my investments.
What’s so great about Philip Morris? Okay, have you travelled much? Everybody smokes cigarettes, everywhere in the world, except in America, or maybe just “except in Colorado”, where I live, where people are wildly athletic and more slender than our fellow Americans. Can you say “captive market?” In fact, Philip Morris sells tobacco products in 160 countries.
The financials look marvelous and so does the stock chart. Earnings per share are projected to grow at a compounded annual rate of 14% for the fiscal years 2011 through 2013, which is a consensus estimate based on projections by 15 investment firms. The dividend of $2.56 per share yields 4.34%, which means investors get paid as if they owned a bond while they wait for the stock price to go up. There’s a PE of 15.7 and a beta of 0.8.
The stock price has just begun to reach new highs. (Don’t worry too much, new highs can be a wonderful thing. There’s nobody who owned this stock at a higher price and is itching to sell the moment it reaches the price they bought it at. Those people drive the price back down. Those people do not exist with Philip Morris stock!)
The stock has recently been trading in the $56 to $61 area, and while it would be really nice to buy at $57.50 or less, there’s a lot to be said for buying a big dividend stock and having a little patience. I think patience with Philip Morris can be rewarded this year.
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