3. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 55
Dividend Yield as of May 26: 4.61%
Ariel Investments’ Stake Value: $344,868,000
Philip Morris International Inc. (NYSE:PM) is a multinational tobacco company, selling products in over 180 countries. In Q1 2022, the company posted an EPS of $1.56, which beat analysts’ expectations by $0.07. Moreover, the company’s revenue of $7.7 billion presented a 2.1% year-over-year growth.
In 2021, Philip Morris International Inc. (NYSE:PM) announced a 4.2% growth in its quarterly dividend to $1.25 per share. The company has raised its dividend every year since its IPO in 2008. The stock’s dividend yield, as of May 26, stood at 4.61%.
Ariel Investments initiated its position in Philip Morris International Inc. (NYSE:PM) during the third quarter of 2013, purchasing shares worth $957,000. In Q1 2022, the company was the fourth-largest holding of Ariel Investments and represented 3.05% of John Rogers’ portfolio. The hedge fund held shares worth roughly $345 million in the company.
At the end of March 2022, 55 hedge funds in Insider Monkey’s database held stakes in Philip Morris International Inc. (NYSE:PM), valued at $6.6 billion. In comparison, 47 hedge funds held stakes in the company in the previous quarter, worth $6.2 billion.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm has to say:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
