10 Reasons You Should Buy This Stock Today

There are two things I've got to tell you up front. One, I'm not David Letterman, so I hope you're not expecting comedy in this list. Two, this company is not the most popular one around, so if you invest in it, you might get some dirty looks. But investing is about making money, and this one should help you accomplish that. In spades.

The company I have in mind is cigarette maker Philip Morris International. And here are 10 reasons why you should consider owning shares.

No. 10: One product
Unlike conglomerates such as Tyco (NYSE: TYC  ) with business interests in many different segments, Philip Morris focuses on one: tobacco. This keeps management's attention on growing the business without distractions. Altria, Philip Morris' former parent, used to be in the food business when it owned Kraft Foods (NYSE: KFT  ) , and it's still in the wine business. Not exactly core competencies.

No. 9: Long-term management
The current management team has an average tenure of more than 15 years. CEO Louis Camilleri has been with Philip Morris for 31 years. Such experience gives the company a big leg up.

No. 8: Repeat customers
Many companies, such as Hewlett-Packard (NYSE: HPQ  ) , can rely on customers buying their products consistently, over long periods of time. Cigarette smokers do the same thing, and provide the same predictability.

No. 7: Market domination
Outside of China and the U.S., Philip Morris controls one-quarter of the world cigarette market, more than any competitor. It has seven of the top 15 brands worldwide, including the leading brand (Marlboro), which has nearly three times the market share of the runner-up. That kind of dominance is rare.

No. 6: Tons of cash flow
Over the past 12 months, Philip Morris has generated more than $6.5 billion in free cash flow. Over the nearly six years for which financial information is available, it has averaged more than $5.4 billion annually.

No. 5: High return on equity
Not only does Philip Morris throw off cash, but it's highly profitable; the company has a return on equity (ROE) well in excess of 40%, which it's maintained ever since separating from Altria. Only 23 companies trading on major U.S. exchanges (that aren't financials or energy companies) manage to throw off that much cash and have a ROE greater than 20%. Many of these are familiar names, such as Apple (Nasdaq: AAPL  ) and Oracle (Nasdaq: ORCL  ) . A select group indeed.

No. 4: Hedge against a weak dollar
With 100% of its revenue generated outside of the United States, but its reporting in U.S. dollars, the company's revenue and earnings will look even better when translated, thanks to weakness in the dollar. That protects you as an investor, should the dollar continue to decline.

No. 3: In top 100 yielding stocks
Wharton professor Jeremy Siegel has shown that high-yielding, dividend-paying stocks have a significant advantage over the rest of the market. Specifically, he showed in one study that the S&P's 100 highest-yielding stocks outperformed the overall index by three percentage points annually from 1957 to 2003. That may not seem like much, but it's really a big deal. Philip Morris is currently in the top 50 yielding S&P 500 companies, just a bit further down from names like Southern (NYSE: SO  ) .

No. 2: Commitment to pay the dividend
Management has often said that it plans to return value to shareholders, which it primarily does through the dividend. In the last earnings conference call, Chief Financial Officer Hermann Waldemer said, "Our commitment to enhance shareholder returns remains as strong as ever." Last summer, Waldemer stated that the company is committed to its target payout ratio of 65%. That is, the company is committed to paying investors $0.65 of every dollar it makes in net income.

No. 1: A large, secure dividend
You would think that payout ratio means a hefty dividend, and you'd be right. Right now, the company is yielding 4.6%. While that's not the biggest yield out there, it's probably one of the most secure, because of the company's strong financial position and stable business. Compare it to previously high payers that had weak financial positions and unstable businesses, such as JPMorgan Chase (NYSE: JPM  ) , which slashed its dividend early this year. I expect Philip Morris to still be paying its hefty dividend 100 years from now.

While Philip Morris is not a Motley Fool Income Investor newsletter pick, it would not surprise me to see it become one. That's because it fits many of the criteria advisor James Early looks for – namely, a growing dividend, a commitment to pay it, and the financial stability to continue doing that.

If you want to get paid by more of your companies, consider taking a free 30-day trial of Income Investor. There you'll receive a new idea every month and be able to pick from all the past ones, as well. In fact, the recommended companies have an average dividend yield of 4.2% right now, and are beating the S&P 500 by more than seven percentage points on average. There's no obligation -- simply click here to give it a try.

This article was originally published Nov. 21, 2009. It has been updated.

Jim Mueller owns shares of Philip Morris and Apple. Southern Co. is an Income Investor selection, Apple is a Stock Advisor choice. Philip Morris has been chosen by Global Gains. The Fool owns shares of and wrote puts on Oracle. While the Fool's disclosure policy doesn't like smoking cigarettes, it does like smoking dividends.


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