Tuesday was a great day for Philip Morris International (). The company manufacturers and sells tobacco products internationally in over 180 countries, best know for its Marlboro brand. The company was spun off of Altria () back in March 2008 as a way to separate its domestic and international operations.The stock surged 10.47% in Tuesday’s session in a move that entirely erased a drawdown that had been underway since the summer. From a technical standpoint, headed into earnings the stock was also stuck under resistance as it butted up against its 50-DMA. But Tuesday’s move fully erased all of the past month’s losses.
The catalyst for Tuesday’s move was earnings.PM reported its eleventh earnings triple play in its history and the first since February 2023.An earnings triple play is a term we coined back in the mid-2000s for a company that reports 1) better than expected EPS results, 2) better than expected revenue results, and 3) raises forward guidance.
In response, the stock rose over 10% for not only its best reaction to earnings on record, but also for its third best day of any session dating back to 2008 when the company was spun off of Altria Group. Those other days with over 10% gains were March 13, 2020 and October 13, 2008.
Below we show a snapshot from our Earnings Explorer tool which includes the 20 earnings reports with the strongest upside stock price reactions for Philip Morris International (PM) since it began trading back in 2008.Again, yesterday was its single strongest response to earnings to date.(Click on image to enlarge)
Of course, a higher stock price can put a dent into dividend yields. Given the size of yesterday’s move higher, PM’s dividend yield dropped from 4.54% on Monday to 4.15% on Tuesday. That 39 bps drop is the largest single day move in PM’s dividend yield since the spring of 2020, and it leaves the yield around one of the lowest levels since March 2018. While PM’s yield is down significantly on the move and now sits in the bottom quartile of its historical range, we would note that it still holds the 37th highest yield of all S&P 500 members.
Perhaps more notably, while the dividend yield of Philip Morris International is still high relative to other stocks, uncharacteristically the opposite is true relative to bonds.In the chart below, we show the spread between PM’s dividend yield and the yield on the 10-year Treasury.As shown, for the vast majority of the stock’s history (barring a brief period shortly after the spin-off), PM had a yield larger than that of the 10-year.But yesterday’s 10%+ share price gain puts the stock’s dividend yield below the 10-year Treasury yield by roughly 5 bps.
While the relative attractiveness of PM’s dividend has perhaps taken a hit, the strong results of earnings means that the safety of the yield has become more attractive.In the chart below, we show the dividend payout ratio of Philip Morris. This ratio shows the percentage of earnings that a company pays out through dividends.Even after raising its dividend last month, PM’s dividend payout ratio has fallen down to 68.3% which is the lowest reading since Q3 2013.
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