We recently compiled a list of the Dividend Contenders List: Top 15. In this article, we are going to take a look at where Philip Morris International Inc. (NYSE:PM) stands against the other dividend contenders.
Dividend stocks have long been favored by investors for the income they generate, and they become even more appealing when dividends increase over time. Investors frequently seek out companies with a strong history of raising their dividends, as this growth boosts their income over the long term. Sustaining long-term dividend growth is challenging. For instance, “dividend aristocrats” are companies that have grown their dividends consistently for at least 25 years, and only about 68 US companies have been successful in achieving this. This demonstrates how difficult it is to attain such a high standard. However, many companies still manage to build shorter dividend growth histories, showcasing their resilience and potential to reach even greater milestones over time. Dividend contenders are well-regarded for having raised their dividends for 10 straight years, though they have yet to reach the 25-year mark needed to be considered long-term dividend growers.
Investors are drawn to dividend growth stocks, as these stocks have shown strong performance over the years. Data from Ned Davis Research covering the past 50 years revealed that high-quality companies that initiate and increase dividends have delivered higher returns and lower volatility than an equal-weighted index. By holding a portfolio of dividend growth stocks, investors can potentially achieve not only favorable risk-adjusted returns but also a more stable investment experience—one less impacted by the risks of market timing, which can reduce long-term gains. This strategy can help investors build wealth steadily over time, contributing to a more secure financial future.
Recently, tech stocks have surged to the forefront, and investors are capitalizing on this momentum, temporarily overshadowing dividend stocks. However, this shift doesn’t imply a dim outlook for dividend stocks. Over the long term, dividend growth stocks have consistently demonstrated their strength and reliability. According to a report by Nuveen, companies that consistently grow or start paying dividends have delivered higher annualized returns with less volatility compared to other parts of the equity market. Although these dividend growth stocks don’t outperform in every market condition, their solid risk-adjusted returns over extended periods make them a strong foundation for an equity portfolio.
Also read: Dividend Champions List: Top 15
Michael Clarfeld, manager of the Dividend Strategy portfolios at ClearBridge Investments, supports investing in dividend stocks. Clarfeld emphasizes the value of long-term compounding, viewing dividend stocks as essential for a well-rounded portfolio. He advocates for a dividend growth approach, focusing on companies capable of steadily increasing their dividends over time. Instead of chasing high yields for immediate gains, he advises investors to consider total return, which includes the reinvestment of dividends. In an interview with Morningstar, he noted that the average company in his portfolios has compounded dividends at around 9% annually, meaning an investor’s income could potentially double every eight years. Clarfeld further said that dividend investing centers on evaluating a company’s cash flows and how they allocate payouts to investors.
In this dividend contenders list, we will take a look at companies that have raised their payouts for at least 10 consecutive years.
Our Methodology:
This list focuses on dividend contenders—companies known for raising their dividends consistently for 10 years but less than 25. From this group, we selected those with the highest dividend yields as of November 11, ranked from lowest to highest yield.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A man exhaling smoke from a cigarette indicating the use of tobacco products.
Philip Morris International Inc. (NYSE:PM)
Dividend Yield as of November 11: 4.29%
Philip Morris International Inc. (NYSE:PM) is an American multinational tobacco company that also offers a wide range of related products. In October, the stock hit its all-time high at nearly $133 per share as the company’s smoke-free segment continues to generate substantial momentum. The stock has delivered a nearly 32% return since the start of 2024. In the third quarter of 2024, the company’s smoke-free product (SFP) shipments, now available in 92 markets, approached 40 billion units. This segment contributed 38% to its total net revenue and made up 40% of gross profit, marking an increase of 1.9 and 2.2 percentage points, respectively, compared to the same quarter last year.
Zyn remains the largest contributor to Philip Morris International Inc. (NYSE:PM)’s growth, with volumes increasing by 43.6% year-over-year, reaching 164.6 million cans for the quarter. Zyn is a nicotine pouch containing nicotine powder and flavoring rather than tobacco. The company acquired the brand at the end of 2022 through its purchase of Swedish Match, a transformative acquisition for the company.
Philip Morris International Inc. (NYSE:PM) generated $9.9 billion in revenues in the most recent quarter, up 8.4% from the same period last year. The revenue exceeded analysts’ expectations by $220 million. The company’s operating income for the quarter came in at $3.7 billion, which saw an 8.4% growth on a YoY basis. It showed confidence in its cash position, expecting to generate approximately $11 billion in operating cash flow in 2024.
Philip Morris International Inc. (NYSE:PM) offers a quarterly dividend of $1.35 per share, having raised it by 3.8% in September this year. Through this increase, the company stretched its dividend growth streak to 15 years. The stock supports a dividend yield of 4.29%, as of November 11. It is one of the best stocks on our dividend contenders list.
Overall PM ranks 10th on our list of the top dividend contenders. While we acknowledge the potential of PM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.