06-20-2013, 09:17 PM
So I haven’t been buying too much lately. I’ve been content to sit by and watch the market run up. It may be a psychological mistake, but I am hesitant to buy into strength. As a result I’ve had a little cash building up on the side, and I decided to make a small purchase of 25 shares of PM on this week’s dip. With commission, I got the shares for $87.84 each. I almost went for 50 shares, but though I’d be cautious. I can always grab another 25 shares later if the price falls further.
I’ve never regretted buying a tobacco stock, and am happy to add a bit more of this best in breed international company at these prices. I locked in a yield on these shares of about 3.88 percent. PM’s earnings growth is good, its dividend growth rate has been excellent, and it produces gobs of cash quarter after quarter. They payout ratio is in the low 60s, which I think is very comfortable for a company of this type (compare to MO’s 80 percent payout ratio). Add to the good numbers the fact that they sell the most popular brands of an addictive product all over the globe, and I’m feeling pretty safe with this buy.
I’ve been reading about some concerns with PM’s debt levels, but it doesn’t concern me given the excellent cash flow PM produces. Moreover, I think the additional debt is being used to help fund PM’s consistently aggressive share buyback. Sounds reasonable to me to borrow at 1 percent to retire shares that you would have had to pay a 3.5 to 4 percent dividend on.
(For those of you tuned in to the ticker: yes, it turns out that I should have waited longer in the day -- it closed at $86.63! I plan to hold these shares for many many years, so this doesn't bother me. And like I said above, if it keeps going down, I may pick up even more.)
I’ve never regretted buying a tobacco stock, and am happy to add a bit more of this best in breed international company at these prices. I locked in a yield on these shares of about 3.88 percent. PM’s earnings growth is good, its dividend growth rate has been excellent, and it produces gobs of cash quarter after quarter. They payout ratio is in the low 60s, which I think is very comfortable for a company of this type (compare to MO’s 80 percent payout ratio). Add to the good numbers the fact that they sell the most popular brands of an addictive product all over the globe, and I’m feeling pretty safe with this buy.
I’ve been reading about some concerns with PM’s debt levels, but it doesn’t concern me given the excellent cash flow PM produces. Moreover, I think the additional debt is being used to help fund PM’s consistently aggressive share buyback. Sounds reasonable to me to borrow at 1 percent to retire shares that you would have had to pay a 3.5 to 4 percent dividend on.
(For those of you tuned in to the ticker: yes, it turns out that I should have waited longer in the day -- it closed at $86.63! I plan to hold these shares for many many years, so this doesn't bother me. And like I said above, if it keeps going down, I may pick up even more.)