Markets
PM

Will Philip Morris International Inc. Raise Its Dividend in 2016?

PM Dividend Chart
PM Dividend Chart

PM Dividend data by YCharts .

More recently, the face of Philip Morris International's dividend growth has slowed. A 6% rise in 2014 raised some alarm bells, and this year's 2% boost seemed almost like a token gesture.

The primary problem that has held back Philip Morris has been the strength of the U.S. dollar. As a U.S. company that does all of its business overseas, Philip Morris relies on revenue denominated in foreign currencies, and those currencies have generally performed badly for several years. As the U.S. economy continues to outperform much of the rest of the world, the dollar's strength has had an even greater influence on internationally focused companies, and Philip Morris is one of the most extreme examples.

For instance, in Philip Morris' most recent quarter , the company posted adjusted earnings of $1.24 per share. Yet the impact of falling foreign currencies cost Philip Morris $0.37 per share in earnings. The effect on the top line has been equally large, with a $1.4 billion currency hit to sales turning what would have been 6% revenue growth into a 12% drop. Those are problems that British American Tobacco and Imperial Tobacco largely don't have to deal with, as the British pound has weakened appreciably against the U.S. dollar over the past year, putting Imperial and British American in a better foreign-exchange position.

Nevertheless, Philip Morris has made it clear that its priority is to sustain and grow the dividend. The company has suspended what was a large stock repurchase program for 2015 in order to ensure that sufficient capital was available to continue making dividend payments.

To do so, Philip Morris has made smart business moves . The company's investment in cigarette alternatives has risen lately, with its iQOS heat-not-burn technology showing early signs of promise among customers. The tobacco giant has also used strategies to reduce internal costs while keeping cigarette prices moving higher to help offset the dollar's impact.

When will Philip Morris International's dividends rise again?

Philip Morris' 2% increase came just a few months ago, and the company generally announces dividend boosts around the same time each year in early to mid-September. With the company's payout ratio being fairly high, the future of Philip Morris International's dividend growth will rely largely on what happens to foreign currency exchange rates between now and next summer. If the dollar can finally stop appreciating quite so much against key currencies, then Philip Morris could finally get back to a position in which double-digit percentage dividend growth is a possibility for 2016 and beyond.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Will Philip Morris International Inc. Raise Its Dividend in 2016? originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

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


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

In This Story

PM BTI

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More