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Eye on the Prize – More Philip Morris International (PM) Shares

21 December 2009 No Comment

One of my favorite long term stocks is Philip Morris International (PM).  The company that sells cigarettes worldwide is a great core holding of your portfolio.  The international exposure (great with a weak dollar), the history of ever increasing dividends and the potential growth in certain international markets make this a clear winner.

PM has crept back up to levels we haven’t seen for some time, so the attractive entry point is likely in the past.  At current levels, the dividend yield is just under 5%.  Compare that to the yield at the low earlier in the year when the shares traded at $32: over 7%.  If you backed up the truck and loaded up with some PM shares in the mid to low $30’s, then you do some fantastic investing.  I wouldn’t sell those shares and lock in the profits on share price appreciation; rather, I’d hold the shares and continue receiving the massive cash flow that you locked in based on your cost.

I’m not adding to my position at current levels; instead, I’m actually rooting for a lower stock price.  If PM hit $40, for example, it would be a great opportunity to add to your position.  But, what might be the catalyst for a drop in share price?

  1. A strong move higher in the dollar – since PM’s sales are overseas, a strong dollar actually hurts them.
  2. A massive broad market move lower – this isn’t out of the question as we move into 2010 – still a great deal of economic uncertainty.

For additional investing ideas, check out my Major Trends that I’m watching.

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