Nina Lyu
PMI's 2022 full-year dividend yield is in the range of 2.1% to 5%.
With a market capitalization of $157 billion, PMI owns the top heat not burn (HnB) brand IQOS in addition to its dominant Marlboro cigarette brand.
Since its launch in 2014, IQOS has grown to a customer base of 19.5 million. IQOS sales growth has compensated for declining cigarette sales. That's why PMI's total sales grew 3.4% in the first nine months of 2022.
Analysts at the New York Stock Exchange believe that the company's earnings will grow at an annual rate of 2.8% over the next five years and that PMI's dividend distribution ratio will be around 92% in 2022.
At first glance, this seems high. But because tobacco companies need minimal capital to operate, this distribution rate should be sustainable in the near term. Since PMI's dividend will grow at a slower rate than its earnings over the next few years, the dividend should be very safe.
Most importantly, income investors can snap up shares of the tobacco giant and its 5% dividend yield at a reasonable valuation. The stock's forward P/E ratio of 18.7 is higher than the tobacco industry's average forward P/E ratio of 13.4.
Special Note: This article is not intended as an investment reference or recommendation.
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