British American Tobacco could make more acquisitions in Indonesia after its purchase of a majority stake in the country’s fourth-largest cigarette maker for $494m.
The group, maker of Dunhill and Lucky Strike cigarettes, said its 85 per cent stake in Bentoel Internasional Investama would give it a foothold in Indonesia’s lucrative kretek – or clove-flavoured cigarette – market, which accounts for 93 per cent of the country’s tobacco sales.
Ben Stevens, BAT’s finance director, said there could be further room for consolidation given that the deal would lift BAT’s market share by volume in Indonesia only from 2 per cent to 8 per cent, leaving it a small operator in the world’s fifth-biggest tobacco market.
He said: “It would depend on whether the other guys are selling.”
He said 8 per cent was still a small market share and BAT would like to increase that. “If another acquisition opportunity comes up we would certainly not rule it out.”
Philip Morris International, BAT’s main rival, is the Indonesian market leader with about 29 per cent of the estimated 230bn kretek sticks sold last year, mainly through its Sampoerna unit, which it bought for $5bn in 2005. It is followed by Gudang Garam and Djarum, two local companies that control 21.1 per cent and 19.4 per cent of the market, respectively.
The tobacco industry has experienced falling cigarette sales in many developed markets as a result of growing health concerns, smoking bans, higher taxes and advertising restrictions. Like its rivals, BAT has sought to build sales in emerging markets as tobacco consumption in western European markets declines.
Indonesia has comparatively lax rules and is the only Asian country not to have signed the World Health Organisation’s Framework Convention on Tobacco Control.
Government officials acknowledge the long-term cost of its policies is likely to be greater than the short-term gains, but are conscious that harming the interests of millions of people employed in the industry could be politically damaging.
Last year, BAT spent about £3bn ($4.9bn) to acquire Tekel, the Turkish tobacco company, and Skandinavisk Tobakskompagni, the cigarette arm of Denmark-based ST Group.
Some 61 per cent of revenue and 69 per cent of operating profits were generated by operations outside Europe.
Analysts said the deal, at 12.9 times underlying ebitda earnings, was expensive, particularly compared to the Sampoerna acquisition, at 13.7 times. But they added BAT had little choice considering its waning share in Indonesia, where cigarette sales jumped 11.5 per cent in the first quarter of this year to 59bn sticks compared to the same period last year.
Deutsche Bank and UBS advised BAT on the deal while Credit Suisse advised Rajawali, which owned 56 per cent of Bentoel.
http://www.ft.com/cms/s/0/c18d57d6-5afc-11de-be3f-00144feabdc0.html?referrer_id=yahoofinance&ft_ref=yahoo1&segid=03058&nclick_check=1
Sunday, June 21, 2009
Big Tobacco down but not snuffed out
(CNN) -- The tobacco industry was once a well-funded behemoth in American politics, and while Big Tobacco's power is slowly eroding, its influence is far from gone.
Once President Obama signs the new tobacco bill, the tobacco industry will be subject to federal regulation.
President Obama soon is expected to sign a bill that would give the Food and Drug Administration power to regulate the manufacturing, marketing and sale of tobacco.
Anti-tobacco activists champion the legislation as a historic step forward for public health, but even some who have fought tobacco concede that the tobacco companies scored some wins in the final legislation.
"It's a great victory for the public health community, but I would not overestimate the demise of the tobacco industry and their ability to lobby," said Paul G. Billings, vice president of national policy and advocacy for the American Lung Association.
In the past century, the tobacco industry has been distinctive in its ability to avoid coming under the authority of the FDA, while almost every other consumer product has been subject to federal regulation.
Congress voted in 1965 to require all cigarette packages to carry warning labels, a warning that was made under the surgeon general's name five years later.
It would prohibit tobacco companies from using terms such as "low tar," "light" or "mild," require larger warning labels on packages that show pictures of the effects of tobacco use and restrict advertising of tobacco products. It also would require tobacco companies to reduce levels of nicotine in cigarettes.
Similar legislation, introduced by Sen. John McCain, R-Arizona, more than a decade ago, failed to make it through Congress.
Patrick Reynolds, whose grandfather founded the R.J. Reynolds Tobacco Co., said the passage of the bill "marks the diminished clout of the tobacco lobby on the Hill."
Stanton Glantz, a longtime anti-tobacco advocate and director of the Center for Tobacco Control Research and Education at the University of California, San Francisco, said the public health community has made "gigantic progress" over the past few decades, but he sees the FDA bill as a win for Philip Morris USA, the nation's biggest cigarette company.
At last week's annual National Conference on Tobacco or Health, a large anti-tobacco gathering, in Phoenix, Arizona, Glantz said only about half of the room applauded when it was announced that the legislation passed.
"People were talking about making lemonade out of lemons," he said. "Basically, the public health people cut a deal with Philip Morris."
Philip Morris, which is owned by Altria Group Inc., was the only major tobacco company to endorse the legislation, although the company has expressed some First Amendment reservations about parts of it.
Glantz argues that the legislation legitimizes the tobacco industry at a time when "legitimacy was being lost."
His biggest complaint: The bill creates a 12-member advisory board through which all regulations will flow. Tobacco industry representatives will hold three nonvoting seats.
"Putting three guys on this committee would be a little bit like putting three mobsters on the Department of Justice committee on organized crime," Glantz said, echoing the sentiment of other strong tobacco-control advocates.
R.J. Reynolds said one of its early objections to the legislation was that Philip Morris had a role in crafting it. "The only way a company can grow is at the expense of another," said Maura Payne, vice president of communications for Reynolds American Inc.
Philip Morris argues the bill won't create a commercial advantage for it and instead will create a framework for an emerging market of "reduced-harm products."
"For adults who use tobacco products who want to avoid the health risks of smoking, the best thing for them to do is quit," said William Phelps, a spokesman for Altria.
"Our goal would be to design the best products that we can and then, under federal authority, make those products available to adults who do not quit."
http://www.cnn.com/2009/POLITICS/06/19/tobacco.lobby/index.html?section=cnn_latest
Once President Obama signs the new tobacco bill, the tobacco industry will be subject to federal regulation.
President Obama soon is expected to sign a bill that would give the Food and Drug Administration power to regulate the manufacturing, marketing and sale of tobacco.
Anti-tobacco activists champion the legislation as a historic step forward for public health, but even some who have fought tobacco concede that the tobacco companies scored some wins in the final legislation.
"It's a great victory for the public health community, but I would not overestimate the demise of the tobacco industry and their ability to lobby," said Paul G. Billings, vice president of national policy and advocacy for the American Lung Association.
In the past century, the tobacco industry has been distinctive in its ability to avoid coming under the authority of the FDA, while almost every other consumer product has been subject to federal regulation.
Congress voted in 1965 to require all cigarette packages to carry warning labels, a warning that was made under the surgeon general's name five years later.
It would prohibit tobacco companies from using terms such as "low tar," "light" or "mild," require larger warning labels on packages that show pictures of the effects of tobacco use and restrict advertising of tobacco products. It also would require tobacco companies to reduce levels of nicotine in cigarettes.
Similar legislation, introduced by Sen. John McCain, R-Arizona, more than a decade ago, failed to make it through Congress.
Patrick Reynolds, whose grandfather founded the R.J. Reynolds Tobacco Co., said the passage of the bill "marks the diminished clout of the tobacco lobby on the Hill."
Stanton Glantz, a longtime anti-tobacco advocate and director of the Center for Tobacco Control Research and Education at the University of California, San Francisco, said the public health community has made "gigantic progress" over the past few decades, but he sees the FDA bill as a win for Philip Morris USA, the nation's biggest cigarette company.
At last week's annual National Conference on Tobacco or Health, a large anti-tobacco gathering, in Phoenix, Arizona, Glantz said only about half of the room applauded when it was announced that the legislation passed.
"People were talking about making lemonade out of lemons," he said. "Basically, the public health people cut a deal with Philip Morris."
Philip Morris, which is owned by Altria Group Inc., was the only major tobacco company to endorse the legislation, although the company has expressed some First Amendment reservations about parts of it.
Glantz argues that the legislation legitimizes the tobacco industry at a time when "legitimacy was being lost."
His biggest complaint: The bill creates a 12-member advisory board through which all regulations will flow. Tobacco industry representatives will hold three nonvoting seats.
"Putting three guys on this committee would be a little bit like putting three mobsters on the Department of Justice committee on organized crime," Glantz said, echoing the sentiment of other strong tobacco-control advocates.
R.J. Reynolds said one of its early objections to the legislation was that Philip Morris had a role in crafting it. "The only way a company can grow is at the expense of another," said Maura Payne, vice president of communications for Reynolds American Inc.
Philip Morris argues the bill won't create a commercial advantage for it and instead will create a framework for an emerging market of "reduced-harm products."
"For adults who use tobacco products who want to avoid the health risks of smoking, the best thing for them to do is quit," said William Phelps, a spokesman for Altria.
"Our goal would be to design the best products that we can and then, under federal authority, make those products available to adults who do not quit."
http://www.cnn.com/2009/POLITICS/06/19/tobacco.lobby/index.html?section=cnn_latest
British American Moves into Indonesia
We are maintaining our fair value estimate for British American Tobacco BTI following the firm's announcement that it will acquire 85% of PT Bentoel Internasional Investama for $484 million. British American will ultimately make a tender offer for the remaining outstanding shares of Bentoel. We are pleased to see the company increase its presence in an important international market, but we think it will face stiff competition from more powerful brands.
We view British American's acquisition as a positive move. Bentoel is Indonesia's fourth-largest cigarette manufacturer by volume and maker of the Star Mild and Country kretek brands, and Indonesia is the fifth-largest cigarette market in the world. The acquisition will give British American a solid foothold in the market for kretek, the clove-flavored cigarettes smoked by around 90% of Indonesian smokers. However, Bentoel's share of the market is small, at around 5%, and its core brands have lost incremental share over the past five years. Furthermore, close rival Philip Morris International PM acquired Sampoerna in 2005 and now owns three of the leading five brands in Indonesia, holding a market share of around 30%. We expect Philip Morris to have significant scale advantages over its competitors in the kretek market, but we think this acquisition as a step in the right direction for British American's strategy of expanding its footprint in emerging markets.
http://www.morningstar.ca/globalhome/industry/news.asp?articleid=295595
We view British American's acquisition as a positive move. Bentoel is Indonesia's fourth-largest cigarette manufacturer by volume and maker of the Star Mild and Country kretek brands, and Indonesia is the fifth-largest cigarette market in the world. The acquisition will give British American a solid foothold in the market for kretek, the clove-flavored cigarettes smoked by around 90% of Indonesian smokers. However, Bentoel's share of the market is small, at around 5%, and its core brands have lost incremental share over the past five years. Furthermore, close rival Philip Morris International PM acquired Sampoerna in 2005 and now owns three of the leading five brands in Indonesia, holding a market share of around 30%. We expect Philip Morris to have significant scale advantages over its competitors in the kretek market, but we think this acquisition as a step in the right direction for British American's strategy of expanding its footprint in emerging markets.
http://www.morningstar.ca/globalhome/industry/news.asp?articleid=295595
Philip Morris Int'l (PM) Signs Agreement with Republic of Colombia to Promote Investment in Colombian Tobacco Market
June 19, 2009 2:33 PM EDT
In a Form 8-K, Philip Morris International (NYSE: PM) disclosed that on June 19, 2009, the Republic of Colombia, together with the Departments of Colombia and the Capital District of Bogota, along with our subsidiaries Philip Morris Colombia and Coltabaco, announced that they have signed an agreement to promote investment and cooperation with respect to the Colombian tobacco market and to fight counterfeit and contraband tobacco products.
The Investment and Cooperation Agreement provides $200 million in funding to the Colombian governments over a 20-year period to address issues of mutual interest, such as combating the illegal cigarette trade, including the threat of counterfeit tobacco products, and increasing the quality and quantity of locally grown tobacco. As a result of the Investment and Cooperation Agreement, we will record a pre-tax charge of approximately $135 million (approximately $93 million after-tax) during the second quarter of 2009 equivalent to earnings per share of approximately $0.05.
http://www.streetinsider.com/Corporate+News/Philip+Morris+Intl+(PM)+Signs+Agreement+with+Republic+of+Colombia+to+Promote+Investment+in+Colombian+Tobacco+Market/4743767.html
In a Form 8-K, Philip Morris International (NYSE: PM) disclosed that on June 19, 2009, the Republic of Colombia, together with the Departments of Colombia and the Capital District of Bogota, along with our subsidiaries Philip Morris Colombia and Coltabaco, announced that they have signed an agreement to promote investment and cooperation with respect to the Colombian tobacco market and to fight counterfeit and contraband tobacco products.
The Investment and Cooperation Agreement provides $200 million in funding to the Colombian governments over a 20-year period to address issues of mutual interest, such as combating the illegal cigarette trade, including the threat of counterfeit tobacco products, and increasing the quality and quantity of locally grown tobacco. As a result of the Investment and Cooperation Agreement, we will record a pre-tax charge of approximately $135 million (approximately $93 million after-tax) during the second quarter of 2009 equivalent to earnings per share of approximately $0.05.
http://www.streetinsider.com/Corporate+News/Philip+Morris+Intl+(PM)+Signs+Agreement+with+Republic+of+Colombia+to+Promote+Investment+in+Colombian+Tobacco+Market/4743767.html
Tobacco Regulation Benefits Industry, Consumers, and the Public
MARTIN BARRINGTON TIMES-DISPATCH COLUMNIST
Published: June 21, 2009
Communities are often defined, at least in part, by the businesses that call them home. The history of our great commonwealth has been closely intertwined with tobacco since the first days of Jamestown.
Tobacco has played and continues to play an important role in Virginia's economy. Thou sands of our citizens are connected to the industry, either by helping grow tobacco, by working for a tobacco company, or by selling goods and services to others who do.
So when the government passes legislation affecting the industry, our friends and neighbors notice. And when the largest tobacco company in the area, indeed the nation, supports more regulation, it's reasonable to explain why.
Altria and Philip Morris USA have supported federal regulation of tobacco products by the Food and Drug Administration for nearly a decade -- and with good reason. Fundamentally, we cannot ignore the health issues associated with tobacco use and their implications for consumers and society as a whole. At the same time, as Congress confirmed by passing this legislation, society has decided to continue to permit the sale of tobacco products to adults and to leave decisions about the use of tobacco products to those adults.
We believe that a comprehensive regulatory framework, implemented thoughtfully, can provide significant benefits to tobacco consumers.
These benefits include establishing a common set of high standards for all tobacco manufacturers and importers doing business in the U.S., providing a framework for the evaluation of tobacco products that are potentially less harmful than conventional cigarettes, and creating clear principles for accurate and scientifically grounded communication about tobacco products to consumers.
We also believe that such a framework offers significant benefits to us and others in the tobacco industry. As we all know, tobacco products and tobacco companies have been a source of considerable conflict and controversy over the years.
In the late 1990s, Philip Morris USA was being sued by many state attorneys general, there was extensive debate in Washington about additional regulation, and society was calling for change in the way the industry did business. We realized then, and we still believe now, that change was necessary.
We firmly believe that federal regulation of tobacco products is a significant step in the right direction.
Through the years, we have faced criticism from within the industry and questions about our motives from others. We stand alone in our industry in supporting the legislation that just passed. But leadership is rarely easy.
By supporting FDA regulation, we hoped to provide leadership in helping resolve many of the issues that concern the public, our consumers, the public health community, and our tobacco companies, including a framework for guidance on harm-reduction efforts.
Is the legislation is perfect? No. The bill awaiting the president's signature is the result of compromises by all involved. There are some provisions that we believe cross constitutional limits, and we made our views well-known on that. Moving forward, however, we hope to work constructively with the FDA on these and other issues.
Clearly, regulation will mean changes for the industry. Many have fought against regulation and continue to resist the changes it will bring, claiming some companies will gain a unique competitive advantage from this legislation. To the contrary, the legislation establishes a level playing field for all industry players.
As in any industry, the companies that best meet the evolving preferences of their consumers while adapting to a new environment will be the ones that succeed. That is exactly what we plan to do.
In the end, having clear rules established by a federal agency should provide more predictability for how all tobacco businesses are expected to operate. And that predictability will best serve the interests of our consumers, employees, retirees, suppliers, and the countless others who benefit from the fact that Altria calls Richmond home.
http://www.timesdispatch.com/rtd/news/opinion/commentary/article/ED-BARR21_20090620-183402/275025/
Published: June 21, 2009
Communities are often defined, at least in part, by the businesses that call them home. The history of our great commonwealth has been closely intertwined with tobacco since the first days of Jamestown.
Tobacco has played and continues to play an important role in Virginia's economy. Thou sands of our citizens are connected to the industry, either by helping grow tobacco, by working for a tobacco company, or by selling goods and services to others who do.
So when the government passes legislation affecting the industry, our friends and neighbors notice. And when the largest tobacco company in the area, indeed the nation, supports more regulation, it's reasonable to explain why.
Altria and Philip Morris USA have supported federal regulation of tobacco products by the Food and Drug Administration for nearly a decade -- and with good reason. Fundamentally, we cannot ignore the health issues associated with tobacco use and their implications for consumers and society as a whole. At the same time, as Congress confirmed by passing this legislation, society has decided to continue to permit the sale of tobacco products to adults and to leave decisions about the use of tobacco products to those adults.
We believe that a comprehensive regulatory framework, implemented thoughtfully, can provide significant benefits to tobacco consumers.
These benefits include establishing a common set of high standards for all tobacco manufacturers and importers doing business in the U.S., providing a framework for the evaluation of tobacco products that are potentially less harmful than conventional cigarettes, and creating clear principles for accurate and scientifically grounded communication about tobacco products to consumers.
We also believe that such a framework offers significant benefits to us and others in the tobacco industry. As we all know, tobacco products and tobacco companies have been a source of considerable conflict and controversy over the years.
In the late 1990s, Philip Morris USA was being sued by many state attorneys general, there was extensive debate in Washington about additional regulation, and society was calling for change in the way the industry did business. We realized then, and we still believe now, that change was necessary.
We firmly believe that federal regulation of tobacco products is a significant step in the right direction.
Through the years, we have faced criticism from within the industry and questions about our motives from others. We stand alone in our industry in supporting the legislation that just passed. But leadership is rarely easy.
By supporting FDA regulation, we hoped to provide leadership in helping resolve many of the issues that concern the public, our consumers, the public health community, and our tobacco companies, including a framework for guidance on harm-reduction efforts.
Is the legislation is perfect? No. The bill awaiting the president's signature is the result of compromises by all involved. There are some provisions that we believe cross constitutional limits, and we made our views well-known on that. Moving forward, however, we hope to work constructively with the FDA on these and other issues.
Clearly, regulation will mean changes for the industry. Many have fought against regulation and continue to resist the changes it will bring, claiming some companies will gain a unique competitive advantage from this legislation. To the contrary, the legislation establishes a level playing field for all industry players.
As in any industry, the companies that best meet the evolving preferences of their consumers while adapting to a new environment will be the ones that succeed. That is exactly what we plan to do.
In the end, having clear rules established by a federal agency should provide more predictability for how all tobacco businesses are expected to operate. And that predictability will best serve the interests of our consumers, employees, retirees, suppliers, and the countless others who benefit from the fact that Altria calls Richmond home.
http://www.timesdispatch.com/rtd/news/opinion/commentary/article/ED-BARR21_20090620-183402/275025/
health insurance companies makes money over tobacco
Life Insurance Companies' Tobacco Investments: Profits over Health
More than a decade after Harvard University researchers first revealed that life and health insurance companies were major investors in tobacco stocks—prompting calls upon them to divest—the insurance industry has yet to kick the habit, they say. A new article on insurance company holdings, published in the New England Journal of Medicine, shows that U.S., Canadian, and U.K.-based insurance firms hold at least $4.4 billion of investments in companies whose subsidiaries manufacture cigarettes, cigars, chewing tobacco, and related products. These tobacco products currently contribute to the deaths of 5.4 million people worldwide annually, according to the World Health Organization. Tobacco use is a major risk factor for stroke, heart attack, lung disease and cancer.
“Despite calls upon the insurance industry to get out of the tobacco business by physicians and others, insurers continue to put their profits above people's health,” says J. Wesley Boyd, lead author of the article. “It's clear their top priority is making money, not safeguarding people’s well-being.”
Boyd and his colleagues point to Newark, New Jersey-based Prudential Financial (PRU), which sells life insurance and long-term disability coverage. With total tobacco holdings of $264.3 million, Prudential Financial is a major investor in three tobacco firms, including Reynolds American (RAI), whose subsidiary R.J. Reynolds manufactures Camel and Pall Mall cigarettes, and Philip Morris (PM), maker of the popular Marlboro brand.
Sun Life Financial (SLF), based in Toronto, sells life, health, disability, and long-term care insurance. It also owns slightly more than $1 billion in stock in two tobacco companies, including $890 million in Philip Morris.
London-based Prudential, which offers health, disability, and long-term care insurance, has holdings of $1.38 billion in two tobacco companies, including British American Tobacco (BTI), which markets Kent and Lucky Strike cigarettes.
The researchers also itemize the substantial tobacco holdings of Northwestern Mutual of Milwaukee and Massachusetts Mutual Life of Springfield, Massachusetts, along with those of Standard Life (SLFPF.PK), a health and life insurer based in Edinburgh, Scotland.
Boyd and his co-authors, David Himmelstein and Steffie Woolhandler at the Cambridge Health Alliance and Harvard Medical School, culled their data from Osiris, a proprietary database of industrial, banking and insurance companies. Osiris draws upon Securities and Exchange Commission filings and news reports from providers like Dow Jones and Reuters.
“Although investing in tobacco while selling life or health insurance may seem self-defeating,” the authors write, “insurance firms have figured out ways to profit from both. Insurers exclude smokers from coverage or, more commonly, charge them higher premiums. Insurers profit—and smokers lose—twice over.”
http://seekingalpha.com/article/141807-life-insurance-companies-tobacco-investments-profits-over-health
More than a decade after Harvard University researchers first revealed that life and health insurance companies were major investors in tobacco stocks—prompting calls upon them to divest—the insurance industry has yet to kick the habit, they say. A new article on insurance company holdings, published in the New England Journal of Medicine, shows that U.S., Canadian, and U.K.-based insurance firms hold at least $4.4 billion of investments in companies whose subsidiaries manufacture cigarettes, cigars, chewing tobacco, and related products. These tobacco products currently contribute to the deaths of 5.4 million people worldwide annually, according to the World Health Organization. Tobacco use is a major risk factor for stroke, heart attack, lung disease and cancer.
“Despite calls upon the insurance industry to get out of the tobacco business by physicians and others, insurers continue to put their profits above people's health,” says J. Wesley Boyd, lead author of the article. “It's clear their top priority is making money, not safeguarding people’s well-being.”
Boyd and his colleagues point to Newark, New Jersey-based Prudential Financial (PRU), which sells life insurance and long-term disability coverage. With total tobacco holdings of $264.3 million, Prudential Financial is a major investor in three tobacco firms, including Reynolds American (RAI), whose subsidiary R.J. Reynolds manufactures Camel and Pall Mall cigarettes, and Philip Morris (PM), maker of the popular Marlboro brand.
Sun Life Financial (SLF), based in Toronto, sells life, health, disability, and long-term care insurance. It also owns slightly more than $1 billion in stock in two tobacco companies, including $890 million in Philip Morris.
London-based Prudential, which offers health, disability, and long-term care insurance, has holdings of $1.38 billion in two tobacco companies, including British American Tobacco (BTI), which markets Kent and Lucky Strike cigarettes.
The researchers also itemize the substantial tobacco holdings of Northwestern Mutual of Milwaukee and Massachusetts Mutual Life of Springfield, Massachusetts, along with those of Standard Life (SLFPF.PK), a health and life insurer based in Edinburgh, Scotland.
Boyd and his co-authors, David Himmelstein and Steffie Woolhandler at the Cambridge Health Alliance and Harvard Medical School, culled their data from Osiris, a proprietary database of industrial, banking and insurance companies. Osiris draws upon Securities and Exchange Commission filings and news reports from providers like Dow Jones and Reuters.
“Although investing in tobacco while selling life or health insurance may seem self-defeating,” the authors write, “insurance firms have figured out ways to profit from both. Insurers exclude smokers from coverage or, more commonly, charge them higher premiums. Insurers profit—and smokers lose—twice over.”
http://seekingalpha.com/article/141807-life-insurance-companies-tobacco-investments-profits-over-health
Sunday, June 7, 2009
Steady Income for PM
"Income investors have to be very careful when searching for yield; many high-yielding stocks have turned in disastrous performances over the last year," cautions Chuck Carlson.
In his The DRIP Investor he adds, "That's what makes Philip Morris International (NYSE: PM) so attractive. The issues stands as as one in which investors can be confident of a steady dividend stream."
"The stock's current yield of 5% is especially attractive in this environment. And the dividend is taxed at the current preferential tax rate of just 15%, giving it an extra appeal relative to yields on fixed-income investments. Furthermore, the dividend is safe.
"Indeed, Philip Morris should earn at least $2.85 per share this year, more than enough to cover the current $2.16 per share dividend outlay. The stock is not without capital-gains potential as well.
"Philip Morris is not likely to lead the market during robust rallies. However, the stock's defensive qualities should help these shares hold up well during market downturns.
"Philip Morris International was spun off from Altria in March, 2008. The firm is a leading player in the international cigarette market. The company has seven of the world's top 15 brands, including Marlboro, the number one cigarette brand in the world.
"The ?rm sells products in approximately 160 countries and controls an estimated 15.6% share of the total international cigarette market outside the U.S.
"While cigarettes are not exactly a growth play in the U.S., overseas markets still have decent growth potential. Philip Morris is a major player in a variety of emerging markets, including Asia and Latin America, where shipment volumes increased in the first quarter.
"The firm has felt the problems in Europe, where shipment volumes fell nearly 4% in the first quarter. Overall, shipment volumes were flat in the first quarter, not a bad showing given the state of global economies.
"Revenue fell 5.5% in the first quarter to $5.6 billion. Revenues were hurt by the strong dollar. Excluding currency, revenue jumped 6%. Excluding currency, pershare earnings jumped nearly 13% in the quarter.
"For 2009 overall, the company has forecast per-share earnings of $2.85 to $3. The consensus analysts' estimate for the year is $3.03 per share. Philip Morris has beaten the consensus earnings estimate in each of the last four quarters.
"Thus, it's possible, especially if the dollar continues to weaken, that the company could beat $3.03 this year. For 2010, Wall Street is expecting profits of $3.43 per share. Pro?t growth in 2010 should lead to a dividend increase.
"At a time when 'high yield' often means 'high risk,' Philip Morris stands out as one company where income investors can be con?dent of a steady dividend stream. For ballast for a portfolio, it's tough to beat this stock.
"Investors can nibble on these shares at current prices and be more aggressive on dips below $40. DRIP investors take note that the DRIP allows any investor to buy shares directly, the first share and every share."
In his The DRIP Investor he adds, "That's what makes Philip Morris International (NYSE: PM) so attractive. The issues stands as as one in which investors can be confident of a steady dividend stream."
"The stock's current yield of 5% is especially attractive in this environment. And the dividend is taxed at the current preferential tax rate of just 15%, giving it an extra appeal relative to yields on fixed-income investments. Furthermore, the dividend is safe.
"Indeed, Philip Morris should earn at least $2.85 per share this year, more than enough to cover the current $2.16 per share dividend outlay. The stock is not without capital-gains potential as well.
"Philip Morris is not likely to lead the market during robust rallies. However, the stock's defensive qualities should help these shares hold up well during market downturns.
"Philip Morris International was spun off from Altria in March, 2008. The firm is a leading player in the international cigarette market. The company has seven of the world's top 15 brands, including Marlboro, the number one cigarette brand in the world.
"The ?rm sells products in approximately 160 countries and controls an estimated 15.6% share of the total international cigarette market outside the U.S.
"While cigarettes are not exactly a growth play in the U.S., overseas markets still have decent growth potential. Philip Morris is a major player in a variety of emerging markets, including Asia and Latin America, where shipment volumes increased in the first quarter.
"The firm has felt the problems in Europe, where shipment volumes fell nearly 4% in the first quarter. Overall, shipment volumes were flat in the first quarter, not a bad showing given the state of global economies.
"Revenue fell 5.5% in the first quarter to $5.6 billion. Revenues were hurt by the strong dollar. Excluding currency, revenue jumped 6%. Excluding currency, pershare earnings jumped nearly 13% in the quarter.
"For 2009 overall, the company has forecast per-share earnings of $2.85 to $3. The consensus analysts' estimate for the year is $3.03 per share. Philip Morris has beaten the consensus earnings estimate in each of the last four quarters.
"Thus, it's possible, especially if the dollar continues to weaken, that the company could beat $3.03 this year. For 2010, Wall Street is expecting profits of $3.43 per share. Pro?t growth in 2010 should lead to a dividend increase.
"At a time when 'high yield' often means 'high risk,' Philip Morris stands out as one company where income investors can be con?dent of a steady dividend stream. For ballast for a portfolio, it's tough to beat this stock.
"Investors can nibble on these shares at current prices and be more aggressive on dips below $40. DRIP investors take note that the DRIP allows any investor to buy shares directly, the first share and every share."
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