A Dividend Stock Benefiting From the Rising Euro
- July 20, 2010
- Dividend Investing, Dividend Stocks, High Yield Dividend Stocks, Top Dividend Stocks
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Just weeks ago some financial pundits were speculating that the European Union would collapse. The prophets of doom forecasted the end of the Euro as staggering debt loads were overwhelming Greece, Italy, Ireland, Portugal and Spain. Many believed this debt contagion would soon infect all of Europe.
Now the Euro has climbed 10% in recent weeks and Europe’s debt woes appear to be under control. For investors that had dumped their European holdings, it’s time to take another look at international dividend stocks.
One stock recommendation from Mad Money host Jim Cramer is Philip Morris (PM: 80.06 +2.80%). The cigarette maker generates 100% of their revenues from international markets and the stock offers a compelling dividend yield of 4.6%.
While Philip Morris has a lower dividend yield than Altria’s (MO: 29.30 +1.60%) near 7% yield, Wall Street expects their earnings to grow much faster given PM’s overseas business.
Philip Morris generates all of their sales in overseas markets where the stigma against smoking is much different than in America. In European countries there is no such thing as a non-smoking section in restaurants. The ubiquitous nature of smokers in these foreign markets is positive for Philip Morris and makes them less susceptible to regulatory risks.
Philip Morris is growing at 10 -12% each year and has a 15.6% market share in the $5.5 trillion international cigarette industry. The company’s portfolio of brands spans the spectrum from discount to high-end. While the stock is not completely insulated to economic downturns, their broad portfolio helps them retain customers (even if it is at lower price points).
In addition to a high dividend yield and double-digit earnings growth, Philip Morris also has an attractive valuation. The stock is trading at only 12x consensus 2011 EPS. However, these estimates are generally based on lower currency rates. The rising Euro could result in PM delivering much stronger results.
