Philip Morris International Inc. (PM): The ‘Most Hated Company On Earth’ That I’d Like To Own ‘Forever’

China is where the growth lies in the industry, with 44% of last year’s estimated industry volume outside the United States. There are an estimated 301 million people smoking in China. This number is growing at an annual rate of 3.9%, and China had the lowest quit rates in a survey of 16 emerging and industrialized countries. The Chinese market is largely state-controlled through the China National Tobacco Corp., with which Philip Morris International Inc. (NYSE:PM) is establishing joint ventures.

The company has made a firm commitment of returning cash to shareholders and has managed the trade-off between growth and dividends superbly. Free cash flows have increased at a 13.3% compoundannual rate since 2007 to $8.4 billion in 2012.

Philip Morris International Inc. (NYSE:PM) has consistently beaten its long-term annual target of 10% to 12% growth in earnings per share (EPS) with a five-year average growth of 15%. In this year’s second quarter, the company announced a three-year, $18 billion stock repurchase program. At the current price, this represents a reduction in share count of about 4% each year, which should help support EPS growth. Since 2008, Philip Morris International Inc. (NYSE:PM) has spent $24.4 billion to buy back about 450 million shares for a reduction of 21.3% in the number of shares outstanding.

As hazardous to your health as smoking is, Philip Morris International Inc. (NYSE:PM) offers clear benefits for your portfolio’s health. EPS growth in excess of 12% per year, which includes a share count reduction of 4%, and a 3.9%dividend are returns you would be hard-pressed to find in the strongest growth stocks — let alone a company in a mature and stable market with forever potential.

Risks to Consider: The risks to Philip Morris International Inc. (NYSE:PM) and the industry in general are short-term scares surrounding legislation and substitute products. The shares drop every time rumors of new regulations hit, but legislation has yet to dent the industry’s long-term profitability or outlook.

Action to Take –> Philip Morris International Inc. (NYSE:PM) has true forever potential in an industry with stable growth and terrific cash flow. You don’t have to like its products, but you can’t deny a history of market-beating returns.

This article was originally written by Joseph Hogue and posted on StreetAuthority.