Philip Morris International Inc. (PM) Is Going Nowhere. Here’s Why.

Second verse, same as the first
Of course, there’s still the old investing truism to consider — that investing isn’t about what a stock has done in the past, but what it might do in the future.

Problem is, the advantage in growth rates that Philip Morris International Inc. (NYSE:PM) stock currently enjoys over its competitors is actually shrinking. From 226 basis points in “extra growth” versus Lorillard Inc. (NYSE:LO) in the past five years, for example, it’s expected to contract to an advantage of only 158 b.p. in the next five years:

Now, is this continued advantage in growth rates still big enough to justify paying four P/E points more for Philip Morris stock than a share of Lorillard costs? Maybe not, once you consider one final fact: What Philip Morris stock owners gain in added earnings growth, they give up in reduced dividend yield.

That’s because faster-growing Philip Morris International Inc. (NYSE:PM) is actually a stingier dividend payer than either of its rivals. Lorillard Inc. (NYSE:LO) shareholders, for example, receive a whopping 5% dividend yield on their shares, while Altria Group, Inc. (NYSE:MO) shareholders collect a nearly as good 4.8% yield. Philip Morris stock, in contrast, pays a relatively meager 3.6%.

Foolish takeaway
With a too-high stock price, a too-low dividend yield, and an earnings growth advantage that’s shrinking, Philip Morris International Inc. (NYSE:PM) stock is priced to go nowhere.

The article Philip Morris Stock Is Going Nowhere. Here’s Why. originally appeared on Fool.com.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Philip Morris International.

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