It can pay to follow billionaire fund manager Stanley Druckenmiller, who has put up phenomenal market-beating returns for decades. One of the largest positions in his Duquesne Family Office is Philip Morris International (PM -0.84%). He owns $175 million worth of the stock, first purchased in the second quarter of 2024. Since then, shares have posted a total return of more than 100% as investors have gotten excited about the company's growth with new nicotine brands that are replacing cigarettes.
Here's the brilliance behind Philip Morris' strategy, and why this is the perfect dividend growth stock over the next 10 years.
Strong growth and international diversification
Spun out as an independent company almost two decades ago, Philip Morris International is one of the leading tobacco companies that sells outside of the United States, while Altria Group sells its brands domestically.
One benefit of owning Philip Morris International is the international diversification it can provide for your portfolio. Even though the company reports in U.S. dollars, the revenue it collects is generally outside the United States, which can help investors when the dollar is getting devalued versus foreign currencies, as is happening today.
The stock has soared mainly because of the major investments the company made beyond cigarettes that are now bearing fruit. It has the leading nicotine pouch brand called Zyn, which is growing like wildfire in the United States, and with incredible profit margins. The brand has gone from virtually nothing 10 years ago to selling more than 200 million cans a quarter in the country.
More globally, the Iqos heat-not-burn device brand is the leader in the category that is popular in Europe and Japan, driving tons of new revenue and earnings for Philip Morris International.
Overall, 42% of the company's revenue now comes from its smoke-free business, driving overall revenue to $38.4 billion over the last 12 months.

Image source: Getty Images.
A steady formula for dividend growth
Dividends are the way that Philip Morris returns capital to shareholders. Its dividend yield is much lower than a year ago at 3%, but it still offers a solid yield for shareholders. One big factor in this dividend consistency is the steady cash flow produced by the legacy cigarette business. Usage for cigarettes is slowly declining in the markets in which it operates, but the company is in a much better position outside of the United States because of its exposure to countries with growing populations. It also has the leading brands that consumers of nicotine are switching to buy.
Today, Philip Morris pays a dividend per share of $5.35. This will be funded by its free cash flow per share, currently at $6.55. No cash flow, no dividends. It's that simple at the end of the day. Free cash flow is actually depressed right now because of the large manufacturing build-out for nicotine pouches and heat-not-burn growth. Over the next five years, investors should see an inflection in free cash flow per share up to $10 or higher.
In turn, this gives the company plenty of room to grow its dividend-per-share payout, which will boost the dividend yield as long as the stock price doesn't go up. Around 10% dividend growth for the next five years will put the stock's dividend-per-share payout at $8.61, which is well below what the company can generate in free cash flow. This gives the company an easy path to keep growing its dividend payout for shareholders.
PM PE Ratio (Forward) data by YCharts
Should you add Philip Morris stock?
Even though the stock is up 100% in the last 12 months or so, Philip Morris International stock may still be a solid buy for investors today. Don't expect 100% returns every year, but the math works out that this stock is still cheaper than most you can buy today.
It has a forward price-to-earnings ratio (P/E) of 24, which is not overly expensive for a consistent earnings grower. The dividend yield is well above the stock market average, with plenty of room to grow this yield in the years to come. Philip Morris has the dominant position in the growing trend of nicotine use without tobacco, which will make it a market share taker versus competitors.
Put it together, and Philip Morris International is a great stock to buy and hold for the long haul. No wonder Druckenmiller has it as one of the largest positions in his portfolio.