Altria Group Inc (MO), Philip Morris International Inc. (PM), Lorillard Inc. (LO): Use Tobacco Companies to Put Cash in Your Pockets

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Philip Morris International Inc. (NYSE:PM) resulted from a spin off from Altria Group Inc (NYSE:MO) (then Philip Morris) in 2008. It sells the Marlboro brand across the world and is the number-one tobacco company in the world. It benefits from the “brand” power of Marlboro but operates in emerging markets among other places where the restrictions are more relaxed in comparison with the US market.

Philip Morris International Inc. (NYSE:PM) is aggressively buying back stock to drive earnings-per-share growth, but it also is seeing growth in markets such as Africa, Algeria, and Vietnam. Also if Philip Morris were to ever penetrate the government-controlled Chinese market, that would open up opportunity in the number-one market in the world. China accounts for roughly one-third of the entire world’s cigarette consumption! Emerging markets will continue to provide Philip Morris with organic revenue growth for the foreseeable future.

Bottom line

Warren Buffett once said: “I’ll tell you why I like the cigarette business. It cost a penny to make. Sell it for a dollar. It’s addictive. And there’s a fantastic brand loyalty.”

This quote pretty much sums it up. Tobacco companies have been rewarding shareholders for decades through massive dividends and share buybacks. Although some challenges have surfaced in recent years, the business model of tobacco is so strong that there is no reason to believe you can’t continue to profit from this industry for the foreseeable future.

Justin Pope owns shares of Philip Morris International. The Motley Fool owns shares of Philip Morris International.

The article Use Tobacco Companies to Put Cash in Your Pockets originally appeared on Fool.com.

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