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The Safest International Dividend Payer on Earth

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I've found what I think is one of the safest dividend-paying stocks on the planet.

In the past year, this company earned $8.1 billion dollars in profits and only distributed $4.5 billion in dividends. In other words, it could see its earnings fall more than 40%... and still be able to maintain the dividend .

At the same time, this company's stock has held strong in the downturn, especially compared with the broader market. In fact, if you go back to just before the downturn started, then it's actually UP -- compared with a nearly double-digit drop in the S&P 500. Just take a look at the graph.

But let me tell you, it's not billions of dollars in earnings that cover the dividend payment or strong performance in a rocky market that make me think this is one of the safest dividend stocks in the world.

While a healthy dividend and reduced losses may be nice perks for investors, it's what this company does that makes it so stable.

You see, when the economy 's strong, people don't have a problem buying high-tech gadgets or spending bundles on luxuries. But as soon as the economy starts to head south, these expenses are the first to be cut.

But there are some goods that people always buy, regardless of the economy. These "necessities," and the companies that make them, often perform well -- even during times of financial uncertainty.

Take cigarettes for example. It doesn't matter much what the economy is doing, people will still buy cigarettes. That's good news for cigarette makers like Philip Morris International ( PM ) .

Philip Morris International is the world's second-largest tobacco company (behind China National Tobacco) and holds almost 16% of the non-U.S. market. PMI's brands include seven of the world's top 15 names, including Marlboro, the No. 1 cigarette brand worldwide.

This company is a spin-off of Altria's ( MO ) cigarette business outside U.S. borders. Altria continues to sell its brands -- including Marlboro and Merit -- in the United States, but this business is slowly shrinking.

Outside the United States, it's a different story.

For all of 2010, Philip Morris International saw cigarette sales rise 4.1% (thanks to acquisitions), while revenue increased 8.7%.

Looking at sales volume , Europe remains the company's single most important market. Right now, 38% of Philip Morris' sales come from Europe.

But things are changing. High taxes and new tobacco regulations are pushing down sales in countries such as Greece, Spain and France, places where per-capita tobacco consumption has historically been pretty high.

However, even though fewer smokers in developed countries are lighting up, estimates still say that there will be 1.4 billion smokers globally by 2020. That's up from the 1.3 billion out there today.

So if it's not the United States and it's not Europe, where are all these new smokers coming from?

Emerging markets .

As countries in these regions expand, there's a substantial increase in the disposable incomes of their citizens. With a little more money in their wallets, a larger percentage of the population can afford premium international cigarettes.

But of course, we're most interested in the dividend -- and its safety.

Starting Oct. 11, Philip Morris International will start paying $0.77 per share every quarter; a 20% dividend increase it recently announced. This amounts to $3.08 per share every year, or a 4.5% yield .

This might not sound like much to write home about, but here's the kicker -- PM has raised the dividend 67.4% since 2008.

Paul Tracy Co-Founder StreetAuthority

And the company can afford this increase to its dividend. Like I said earlier, PMI has a payout ratio of 55% over the trailing 12 months, indicating plenty of room for future growth... and a near zero risk of a cut at this time.

So though shares currently yield 4.5%, investors who buy now are likely to see their yield on cost rise over time.

Now, I know investing in cigarettes may not be for everyone, and I am by no means condoning the behavior. But as an analyst, it's my job to find ripe investment opportunities. And with a history of steady cash flow , the strongest brand names in the industry and substantial emerging-market growth, Philip Morris International is an ideal safety-first income play.

This doesn'tmean this investment is risk-free -- nothing short of a savings account is. However, I do think the stock ranks high among the safest dividend-payers in the world.

But Philip Morris is just one of the many income-paying prospects available from companies focused overseas. In fact, I think the abundance of international income investments is one of the market's best-kept secrets... there are literally thousands of high-yielders abroad.

To prove this, I recently had a member of StreetAuthority's research staff comprise a list of profitable companies with shares yielding 12% or more. What we found was pretty remarkable.

In total, my team found 430 common stocks paying dividends of 12% or higher. However, only 18 of these companies were located in the United States. The other 412 were located in international markets.

Action to take --> This means if you want high yielding stocks -- then 96% of your opportunities are located outside the United States. But don't worry, you can buy many of these without even leaving the U.S. markets.

I have more details -- including several names and ticker symbols -- in a presentation I recently put together. Visit this link to watch now . In the presentation, I've even included the full list of the 18 U.S. companies yielding above 12% .

Disclosure: Neither Paul Tracy nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.

Disclosure: Neither Paul Tracy nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.

Paul Tracy



Disclosure: Neither Paul Tracy nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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