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Philip Morris International: Free Cash Flow King With Upside Potential

publication date: Oct 18, 2019
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Image Shown: Philip Morris International's Marlboro cigarette brand remains very popular worldwide. Pricing power is essential to offsetting declines in traditional cigarette sales volumes as the company positions itself for alternative tobacco products to become a larger part of its revenue streams. Image Source: Philip Morris International – Third quarter 2019 earnings presentation

We continue to like Philip Morris International as a quality high-yield play with good dividend coverage in a low interest rate environment. Strong pricing power enables the firm to offset sales declines of its traditional cigarette volumes as the company waits for its alternative smoking offerings (like IQOS) to represent a bigger chunk of company-wide sales. Please note that foreign currency headwinds remain significant, but manageable. As of this writing, Philip Morris International yields 5.8%.

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