Tobacco company Philip Morris International (PM 0.17%) was created when Altria Group (MO -0.07%) spun off its non-U.S. businesses in 2008. However, Philip Morris hasn't done so well on its own; the stock has not only underperformed the S&P 500 over the last decade but lagged sister company Altria too.

Philip Morris is a U.S. company that reports in USD; when the dollar is stronger than currencies in other foreign markets, the company takes an exchange rate hit on every dollar it brings in.

Those currency headwinds and generally negative sentiment toward tobacco stocks help explain the disappointing returns. But that could change when the next bull market begins. Here are three reasons to consider buying Philip Morris stock today.

1. A market leader in reduced-risk products

The tobacco industry is evolving to reduced-risk products, which aren't good for you, but they've gotten to market as lesser-evil alternatives to smoking. Examples of these products include electronic cigarettes, heat-not-burn devices, and oral nicotine pouches. As the future of nicotine use, tobacco companies are fighting for market share in reduced-risk products.

Philip Morris was among the first movers; its primary product is the heat-not-burn device IQOS, which heats tobacco enough to produce a vapor that users inhale. It was initially launched in 2014 and is a significant contributor to the overall business today. Almost 25 million people use IQOS today, contributing 17% of the total shipment volume in 2022.

The company also made a huge move to acquire Swedish Match, which makes the oral nicotine pouch maker Zyn. The acquisition closed in late November and cost Philip Morris $16 billion. But for its money, Philip Morris secured another market leader; Zyn has a 40% share of the global category. Zyn and IQOS give Philip Morris arguably the best one-two product combination in the nicotine industry moving forward.

2. Infiltrating the U.S. market

The United States has long been one of the world's best tobacco markets; Altria Group, which operates almost exclusively in the United States, does $20.7 billion in sales (Philip Morris does 31.7 billion in comparison). Philip Morris has slowly encroached on Altria's turf, which became an all-out assault in 2022.

Person using an electronic cigarette.

Image source: Getty Images.

First, Philip Morris began talks to acquire Swedish Match (talks began in May); Zyn is immensely popular in the United States, where it has approximately 75.7% market share. Second, Philip Morris and Altria terminated their commercial agreement that would have given Altria rights to sell IQOS in the United States. It cost Philip Morris a $2.7 billion buyout fee, but it provides the company with free rein to sell IQOS after April of next year.

The United States market presents two benefits to Philip Morris; first, it can spur growth because this is all new potential revenue. The company had never operated in America before this. Second, the infusion of U.S. revenue should help offset the currency exchange headwinds the company faces annually. The U.S. market could benefit Philip Morris at Altria's expense.

3. The dividend could become more attractive

Lastly, Philip Morris should remain an excellent dividend stock moving forward; investors can get a 5.2% yield at today's share price. Additionally, investors can feel good that management will protect the dividend. Most investors own the stock for passive income, and management is aware of this.

Happy person holding up cash.

Image source: Getty images.

The dividend payout ratio is a little high at 80% of cash flow, and the balance sheet has taken on debt after acquiring Swedish Match. Still, it should remain manageable; the balance sheet is leveraged at a net debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio of 2.9 -- more than one might prefer, but I don't see a reason for panic. Management is confident it can pay it down quickly with excess cash profits, so keep an eye on the leverage ratio over the coming quarters.

Long-term investors willing to reinvest those dividends over the coming years could build a nice position that delivers strong price returns once Philip Morris gets its footing in the U.S. over the next few years. Additionally, interest rates surged in 2022; assuming rate hikes slow (or rates get cut again) in the future, it could increase demand for the stock's dividend among income-hungry investors.