Philip Morris, Who’s that my Grandfather??

No, Philip Morris is not your grandfather.  However, the company of Philip Morris has been around longer than (or almost as long as) your grandparents.  It was first incorporated in 1902.  I find it interesting that most of their consumers probably have no idea who they are.  Well, “they” are a company with annual revenue of around $30 billion, and a gross profit of almost 60% ($17.5 billion).  They have consistently raised their dividend since spinning off from their wholly owned subsidiary Altria in 2008. They own 7 of the 15 top cigarette brands around the globe.  They deal with none of the tax restrictions of the United States because they are Philip Morris International.  So, why waste time talking about a cigarette maker? 

            I look at this company as what it is – a business that has one of the most (if not the most) addictive products in the world, but which is 100% legal.  If Philip Morris said they were going to suspend all cigarette sales for just one day, what do you think would happen?  If they were to say a pack of Marlboro’s will now cost $20 a pack, do you think people would pay it?  Now, if you’re an investor or a money manager, you’re in the business of making money, right?  No other company in the world can raise prices on a dime and know they will not get hurt one bit.  The business of cigarettes and tobacco has been through pandemonium and back.  At this point in time, a person knows what they are getting into.  Even without advertising, the brand has grown significantly.

            There is no reason why a wealth management company would not put a big chunk of their client’s money in this.  Every 3 months they give a regular dividend of $.77 or $3.08 for the year; they also sport about a 4% yield. It’s no wonder that some of the biggest players have a huge piece of this pie.  State Street owns 74.4 million shares, Vanguard owns 69.8 million shares, and Blackrock Institutional owns 43.8 million shares.  Every three months State Street receives $52.3 million just for owning the shares they have, regardless of what the stock price does.  Isn’t this the perfect company from an investor’s standpoint? 

            It is also peculiar that Philip Morris’s quarterly numbers are never at the forefront of CNBC, like, let’s say, Intel. Maybe it is the old saying, “Out of sight out of mind.”  It has to be because of what they do and what they sell.  But I ask you, as someone who wants to make money, someone who wants more than steady growth, someone who never has to check the price of the stock for 20 years – what better company is there?  They have been around for nearly over 100 years and will absolutely be around for another century.  

What’s in your wallet?