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Better Dividend Stock: Altria vs. Philip Morris

In today's video, producer Austin Smith compares two popular huge dividend stocks, Altria and Philip Morris. Despite Altria's larger dividend yield, he believes its sister company is a better investment. One reason Altria's yield is so much higher is that the company has a higher payout ratio. If Philip Morris were to match this payout ratio, the companies would be much closer.

But that cash is actually better spent being poured back into Philip Morris' growth at the moment. The company's earnings growth rate is more than twice that of Altria, it achieves a higher return on invested capital, and it's cheaper to free cash flow.

For steady-as-she goes dividend seekers, Philip Morris is the top pick here, but there may be better options out there.

For example, we've highlighted the 9 Rock-Solid Dividend Stocks that could make you rich. Just click here now to read more.  



Austin Smith owns shares of Philip Morris International. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On October 14, 2012, at 2:34 PM, mansourg54 wrote:

    PM does not pay higher dividends because it allocates money to the buyback program. PM international business is not as stable as MO due to currency exchange fluctuations and also due to economics in the developing countries. S it needs to keep buying back its shares in order to support the share price. A pack of cigarettes in the US costs $4-$5, in the developing countries it is $0.5 to $2.0. In addition people tend to buy their countries products over foreign products.

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Austin Smith

A long-term investor looking to own the best businesses available.

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