What is the dividend payout for Philip Morris?

Tobacco company Philip Morris International (P.M 0.48%) has increased dividends annually since it was spun off from Altria Group in 2008. The board last raised pay in October.

However, it is important to look beyond the current level and past increases. While everyone likes higher payouts, especially dividend-seeking investors, it’s imperative that investors do some research to see if Philip Morris can sustain the payout.

DIVIDENDS

Philip Morris pays $1.30 per quarter or $5.20 per year. This equates to a dividend yield of 4.5%, more than 3 times S&P 500is 1.4%.

It’s useful to check free cash flow (FCF) to see if the company can afford its dividends. Philip Morris’ 2023 FCF was nearly $7.9 billion, but it spent nearly $8 billion on dividends. In the first half of this year, its $4.1 billion in dividends covered payouts by just $22 million. It’s not a great pillow, though.

Business change

Management touted smoke-free products, which accounted for about 38 percent of Philip Morris’ second-quarter revenue, up from 35.4 percent a year ago.

But that still means it relies on tobacco fuel products for most of its top line. Cigarettes accounted for approximately 80% of the quarter’s shipment volume. Unit count was up 0.4% year-on-year, but international market share fell from 25.5% to 25.3%.

Revenue from fuel products rose 1.2% to $5.9 billion. Revenue from smokeless products increased by 13.6%. Philip Morris will likely need to continue to grow this business to sustain profitability to generate FCF that will fund dividend increases over the long term.