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A Board Member Bought 1,000 Shares of Philip Morris International Inc. (PM)

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Sergio Marchionne, who is a member of Philip Morris International Inc. (NYSE:PM)’s Board of Directors, purchased 1,000 shares of the company’s stock on July 23rd at an average price of $89.07, according to a filing with the SEC. Marchionne now owns almost 50,000 shares of the $150 billion market cap cigarette company, which focuses on international markets; Altria Group (NYSE:MO) was formed in the split of the old Philip Morris International Inc. (NYSE:PM) to focus more on sales in the U.S.

While Philip Morris International Inc. (NYSE:PM)’s headline revenue numbers increased slightly in the second quarter of 2013 versus a year earlier, this was eaten up entirely by higher excise tax numbers and as a result the company’s gross profits and net income both declined over the same period. A roughly similar story holds if we look at its year to date income statement; considering that international markets are supposed to be an area of higher growth for the cigarette industry, this is concerning. At its current market cap Philip Morris International Inc. (NYSE:PM) trades at 17 times trailing earnings, and in value terms we’d generally look for at least moderate earnings growth at that price.

Philip Morris International Inc. (NYSE:PM)However, because cigarette companies are such prolific and reliable cash flow generators, much of the interest in these stocks comes from investors seeking high yields. Philip Morris International Inc. (NYSE:PM) does pay quarterly dividends of 85 cents per share (and has a record of increasing its dividend since it became independently traded), which at current prices results in an annual yield of 3.8%. This is actually lower than what can be found at some of the company’s peers; as a result, both income and value investors have to have at least some confidence in superior future growth numbers from Philip Morris in order to buy in our view.

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