Acquisition PM

Philip Morris Company LogoLast time I bought PM was back in 2013, so it has been a while since I added to this position. This year, the company has been battling some recent declines and the share value been taking most of the damage. It has been one of my few full positions that I have been fully maxed out within my diversification spectrum. But currently, it looks too good of a buying opportunity to miss.

Philip Morris International Inc. (PM) was found in 1900 and is a global cigarette and tobacco company. It holds a highly diversified portfolio of cigarette and tobacco brands. It owns 6 of the top 15 international brands around the world. Though, it is primarily led by the Marlboro brand, which is the best selling cigarette brand in the world. It sells its products in over 200 countries.

  • Dividend Yield: 5.1%
  • 3Yr Divided Growth Rate: 12.4%
  • 5Yr Dividend Growth Rate: 12.2%
  • Payout Ratio: 94.6%
  • P/E: 16.3
  • Consecutive Years of Dividend Raises: 7

I purchased 13 shares for the price of $76.30 adding $52.00 to my annual income.

This is the third time I am initiating an acquisition this year. Also, this recent transaction makes it the fourth time I am adding to PM ownership. Brick by brick baby! Currently it represents to be around 6.8% of my current portfolio. A little bit higher than I would want it to be, but I’ll continue on building other stakes to decrease the weight in the portfolio. Like I mentioned before, for me personally, the sweet spot is no more than 5% for biggest company holding. Obviously the weight fluctuates a little bit due to volatility, so it will never be perfect 5% at all times.

A possible concern is the payout ratio being much more higher than I would like to. I think PM will have to take some action on this with smaller dividend raise in the future or possibly worst case scenario of cutting the dividend. Hopefully, that worst doesn’t come, but I think cigarettes and tobacco are still going to be around for a while.

The 12-month dividend income increased to $2,336.

Thank you for reading & have a great day!

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12 Comments

  1. JC on April 11, 2015 at 15:12

    I’ve been looking at PM myself because this is a pretty juicy long term opportunity. The yield is awesome at 5%+. I expect dividend increases to be a bit lower over the next few years, or at least that’s what I’d like to see. The currency headwinds will eventually turn into tailwinds once the rise of the dollar starts to lose steam. Those are temporary issues that will resolve themselves over time. I’m more concerned about the balance sheet than the currency fluctuations but I think management will navigate through these rough waters.

    • DividendVet on April 12, 2015 at 13:26

      Likewise, the company has some issues which brings about great buying opportunities for dividend growth investors. The way I see it, if the company is not affected by anything at one point or another it does not present itself in lower short term valuations, which in turn doesn’t brings about discounted opportunities to buy. I just take what the market gives me, or at least for now I see strong potential after short term fundamentals are fixed in PM, or not, who knows. Time will dictate.

      Take care.

  2. FerdiS on April 12, 2015 at 10:31

    Thats a good buy getting in at about 5% yield on cost. I own shares and will consider buying more if the fundamentals look right. Thanks for sharing!

    • DividendVet on April 12, 2015 at 13:29

      Yeah, it has a relatively high yield right now, but that is primarily due to the stock being down about 10-15%, and when the stock goes back up, my yield on costs will be even higher and returning more on my investment. Looks like a good deal to me. 🙂

      Best wishes.

  3. Dear Dividend on April 12, 2015 at 10:52

    Thanks for the writeup on PM. Wish I had some extra funds to add more PM. It is sitting close to its 52-week low right now.

    • DividendVet on April 12, 2015 at 13:32

      Indeed it is sitting on 52-week low. I haven’t even noticed it honestly, I just saw the 10-15% drop and I was like, “time to do some bargain shopping.”

      Thanks for stopping by!

  4. Captain Dividend on April 13, 2015 at 18:04

    Can’t argue with this one since I just purchased PM myself. You got a better price than me though. Ohh if I could time the markets …

    • DividendVet on April 14, 2015 at 12:39

      Yeah, I noticed. Good eye there. As far as the price is concerned, ultimately it won’t matter much 10 to 20 years from now, we will both be in a winning boat.

      Good hearing from you.

  5. Dividend Growth Journey on April 18, 2015 at 12:42

    DV, Great purchase at a great price. I hold positions in PM as well as MO and both stocks are great holdings for the long term. I recently added to my PM position around $80 and my position is just about 5% in my portfolio. Might add more if the price drops back to ~80.

    • DividendVet on April 18, 2015 at 20:42

      Thanks, I noticed you did. There were quite a few names jumping on drop in price. Though, PM is making a comeback in price and just a few days ago went up over 8% in a single day. Hmm, a coincidence?

      Take care.

  6. D2R on April 24, 2015 at 21:03

    DV,

    I also made a purchase of PM at about this price. I am satisfied with the purchase, because of their consistent dividend and strong growth. It has shown since then.

    Overall, great buy and I’m excited to continue reading your blogs!

    D2R

    • DividendVet on May 3, 2015 at 13:41

      Can’t go wrong with PM, glad to hear on your addition to the portfolio.

      Glad you enjoying my journey and best of luck with yours.

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