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When it comes to making investment decisions in the world of Finance, it’s crucial to have the right information at your fingertips. Today, we’re diving into the comparison between Altria (NYSE: MO) and Philip Morris International (NYSE: PM), two giants in the tobacco industry. While Altria boasts a hefty 8.9% dividend yield, there are reasons why long-term investors may want to consider Philip Morris International instead, despite its lower yield. Let’s explore the differences and similarities between these two companies and see which one may be the better pick for your portfolio.
Understanding the Dynamics of Altria and Philip Morris International
In 2008, Altria spun off Philip Morris International, giving each company a specific focus on different markets. While both companies share the iconic cigarette brand portfolio that includes Marlboro, their strategies and market presence vary. Altria’s concentration on the US market poses a more binary risk compared to the diversified market presence of Philip Morris International. This difference contributes to Altria’s higher dividend yield, reflecting the increased risk involved in its operations.
Learning from Altria’s Challenges
Altria has faced setbacks in its attempts to diversify beyond cigarettes, with investments in Juul and Cronos resulting in significant writedowns. However, the company is making efforts with its recent acquisition of Njoy in the vape space. While the outcome of this move remains to be seen, Altria’s history of strategic missteps has impacted its stock price and dividend yield. This track record raises questions about the sustainability of its high yield in the long run.
Philip Morris International’s Success Story
On the other hand, Philip Morris International has seen success in transitioning to smoke-free products, with a significant portion of its revenue now coming from non-cigarette alternatives. Despite a lower dividend yield of 5.4%, the company’s strategic execution and market diversification have been well-received by investors. With a strong focus on innovation and adaptation to changing consumer preferences, Philip Morris International presents a compelling investment option for those looking for sustainable growth.
Looking Beyond High Yields
While Altria’s dividend yield may be tempting, investors should consider the long-term prospects and sustainability of the company’s business model. Relying solely on price increases to support dividends may not be a sustainable strategy in the evolving landscape of the tobacco industry. By choosing a lower yield from Philip Morris International, investors can gain exposure to a company that has shown resilience and innovation in a challenging market environment.
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