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."