Summary
- Philip Morris operates a respectable portfolio of assets and is continuing to expand into new segments and improve its margins.
- The company has the potential for long-term shareholder rewards as it continues its near 6% dividend.
- Utilizing an options strategy will allow investors to significantly expand their yield in the immediate term.
- I do much more than just articles at The Energy Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »
Philip Morris (NYSE: PM) is the largest publicly traded tobacco company with a market capitalization of more than $120 billion and a 6% dividend yield. The company has the potential to continue generating strong long-term cash flow for shareholders. As we'll see throughout this article, the company's continued performance and asset portfolio, along with options trading, makes it a quality long-term investment.
Philip Morris COVID-19 Performance
Philip Morris, with lock downs and job losses experienced a difficult quarter from COVID-19.
Philip Morris 1H 2020 Results - Philip Morris Investor Presentation
Specifically, in 2Q 2020, the company saw a 9.5% decline in revenue and a 7.5% YoY EPS decline. That doesn't count an additional ~5% EPS decline due to currency issues. Traditionally, in times of market instability, international currencies suffer more significantly. Philip Morris, as an international company, suffers from that more significantly.
More importantly, in 1H 2020, the company actually performed better. The company saw a mere 0.5% decrease in net revenue and 5.4% increase in combustible tobacco pricing. The company's margins not counting currency increased by 2.3% resulting in a non-currency increase in adjusted diluted EPS by 8%.
Counting currency impacts that was a low-single digit increase, but that growth, and the bottom of COVID-19, is incredibly impressive.
