Investors of tobacco shares do not have many choices nowadays, so if you want to invest in one of these classic dividend payers, are two of the first shares that will probably be on your radar Altria (NYSE: MO) And Philip Morris International (NYSE: PM).
The two shares have their differences, although they were once the same company before they split in 2007. While both companies have the same set of cigarette brands, led by Marlboro, Altria retained the domestic activities, while Philip Morris is active outside the US
Let’s see how these two dividend supplies are stacked against each other today.
Image source: Getty images.
You could assume that if cigarette makers Altria and Philip Morris have the same business models, but that is not entirely true.
Both companies are aimed at diversifying cigarettes to the next generation, smoke -free products, but Philip Morris has had considerably more success than Altria. Philip Morris has developed IQOs, the heat-not-burn devices that use tobacco sticks that have received a considerable market share in large markets around the world, such as Japan, and the company has even acquired the rights to sell IQOs in the US from Altria.
Philip Morris has also found success with his, the oral brand Nicotine Pouch that it won in the takeover of the Swedish competition. The company even expands its production to meet the growing demand.
In 2024, the non -smoking company supplied 14.2% revenue growth and smoke -free products now formed 40% of sales, which shows that the company goes beyond cigarettes.
In the meantime, Altria has had to deal with Cronos group Also fell flat.
Altria has now put his confidence in Njoy after acquiring the maker of e-cigarettes and vapen products for $ 2.7 billion in 2023, which has full marketing permit from the FDA, so that Altria will not make the same mistake as with Juul.
NJOY provides solid growth for Altria, with a consumption shipping volume of 15.3% to 12.8 million, but smokable products still make up almost 90% of Altria’s turnover.
Looking at the financial results of Head -Head, Philip Morris benefits from working on international markets, where smoking has not had the same degree of regulatory and cultural pushback that it has in the US
In 2024, Altria reported a decrease in turnover from 1.9% to $ 24 billion, mainly as a slide of 10.2% in the volume of the cigarette shipping, which was partially compensated by higher prices.
Altria remains very profitable, with an adapted business margin of 61.2%, and adapted profit per share increased by 3.4% in 2024 to $ 5.12.
On the other hand, Philip Morris succeeded in growing the international cigarette volume in 2024, by 0.6% to 616.8 billion, with a much different market than in the total turnover of the US, 7.7% rose to $ 37.9 billion and operational income rose by 16% to $ 14.9 billion. The adjusted profit per share had meanwhile risen 15.6% to $ 6.95.
Altria has long had a reputation as a top dividend payer, and that remains true, because it currently offers a dividend yield of 7%. It also has a long history of increasing his dividend every year.
Looking at the appreciation, based on the rear adapted profit per share, Altria acts with a price-gain ratio of 11.3.
Philip Morris, on the other hand, has a dividend yield and appreciation that reflects its faster growth, because the dividend yield is currently 3.5%, and it has a P/E ratio of 22 based on the adapted profit per share of 6.95.
With a higher dividend yield and a lower valuation, Altria has the lead here.
Although Altria finally seems to have found a growth vehicle on which it can count in NJOY, the company still loses income and its core cigarette company is much stiffer headwind than that of Philip Morris.
In the meantime, Philip Morris has found success with the next generation of products such as Zyn and IQOs, and is growing much faster than his tobacco shares, because even his cigarette activities are still growing.
Philip Morris acts a premium, but for a good reason. With its strength in the next generation products, it has a clear path for long -term growth. That means it is worth paying for.
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Jeremy Bowman has no position in one of the aforementioned shares. The Motley Fool has positions and recommends Cronos Group. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.
Best stock to buy now: Altria vs. Philip Morris International was originally published by De Motley Fool
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