3. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 47
GQG Partners’ Stake Value: $1,368,162,000
Dividend Yield as of March 14: 5.63%
Philip Morris International Inc. (NYSE:PM), a Swiss-American tobacco manufacturing company, has been consistently raising its dividend since its inception in 2008. Since then, it has increased its dividend by 171.7%. The company pays a quarterly dividend of $1.25 per share, with a dividend yield of 5.63%, as of March 14. In February, UBS predicted growth in Philip Morris International Inc.’s (NYSE:PM) organic sales, raising its price target on the stock to $110 while maintaining a ‘Neutral’ rating on the shares.
At the end of Q4 2021, 47 hedge funds tracked by Insider Monkey held stakes in Philip Morris International Inc. (NYSE:PM), down from 48 in the preceding quarter. Those stakes held a consolidated value of $6.2 billion as of December 31. Holding PM shares worth nearly $2 billion, Fundsmith LLP was the company’s leading shareholder in Q4 among those funds. In Q4 2021, GQG Partners held shares in Philip Morris International Inc. (NYSE:PM) worth over $1.3 billion, which accounted for 3.39% of Rajiv Jain’s portfolio.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm had 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.’”
