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British American Tobacco PLC (ADR) (BTI), Altria Group Inc (MO), Philip Morris International Inc. (PM): Turn To Tobacco Companies for Great Yield

Philip Morris International Inc. (NYSE:PM) currently trades at 15.03 times forward earnings with a 23% free-cash-flow yield. The company’s forward dividend yield is 3.6% with a payout ratio of 64%. Philip Morris International Inc. (NYSE:PM) very much trades at a discount considered its future growth potential. The company is strategically positioned in many of the world’s emerging markets and stands to capitalize substantially on these countries’ expansions. One example in particular is Philip Morris International Inc. (NYSE:PM)’s strategic partnerships with China National Tobacco. The arrangement allows China National Tobacco to produce Marlboro products under license in China.

Wrapping up

Dividends are a crucial aspect of any investor’s approach to developing a portfolio. It is important to identify companies with great yields and with a great business to back it up. The three tobacco companies above all meet that criteria. These companies are extremely efficient at generating cash and are diligent in returning that cash to shareholders. I would also look from some capital appreciation out of the tobacco industry as these companies – excluding Altria Group Inc (NYSE:MO), as it primarily operates in the US – are positioned well to capitalize on the growth of emerging markets.

The article Turn To Tobacco Companies for Great Yield originally appeared on and is written by Daniel Paterson.

Daniel Paterson has no position in any stocks mentioned. The Motley Fool owns shares of Philip Morris International. Daniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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