Summary
- I recently added to my position in Philip Morris and I wanted to cover developments since I last covered the company in January.
- While Philip Morris' stock price is actually up a slight bit from where it was when my previous article was published, I'm just as bullish as I was before.
- Philip Morris continues to make progress toward its goal of building a cigarette-free future.
- I believe shares of Philip Morris are trading at an 11% discount to fair value and offer 13% upside from the current price.
- Between Philip Morris' 6.4% yield, 4-5% earnings growth, and 1.2% annual valuation multiple expansion, the company is likely to deliver annual total returns of 11.6-12.6% over the next decade.
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While I found Philip Morris' (PM) recent 2.6% dividend increase to be a bit below my expectation outlined in my Expected Dividend Increases for September 2019 post, that post was written before the news that Philip Morris and Altria (NYSE:MO) are considering an all-stock merger.
I can understand why Philip Morris would be cautious with its dividend increase this year, with a merger between Altria and Philip Morris looking more likely with each passing week.
With that in mind, we'll be examining why I have added to my Philip Morris position twice in the span of less than a month.
I'll be briefly re-examining Philip Morris' dividend safety/growth profile, the company's fundamentals/risks, and the valuation aspect of an investment in the company.
I'll then wrap up my analysis of the company with an estimate of annual total returns over the next decade.
