10 Reasons You Should Buy This Stock Today

There are two things I've got to tell you up front. First, I'm not David Letterman, so I hope you're not expecting comedy. (Well, intentional comedy.) Second, 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 stock should help you accomplish that. In spades.

I'm talking about cigarette maker Philip Morris International. Here are 10 reasons why you should consider owning shares.

10. One product
Some companies operate in multiple, often unrelated areas. General Dynamics (NYSE: GD) is involved with business jet manufacturing, ammunition and ordnance, and manufacturing commercial ships, among many other fields of interest. Altria, Philip Morris' former parent, used to be in the food business when it owned Kraft Foods, and it's still in the wine business. In contrast, Philip Morris concentrates solely on one business: tobacco. That keeps management focused, not distracted by trying to balance one business segment against another.

9. Long-term management
The current management team has an average tenure of more than 16 years. CEO Louis Camilleri has been with Philip Morris for 32 years. Such experience gives the company a big leg up.

8. Repeat customers
Selling a product that customers use over and over again is a very successful strategy. For instance, Merck (NYSE: MRK) sells Claritin for allergy sufferers and Pepcid for heartburn relief. Abbott Labs (NYSE: ABT) sells the Freestyle glucose monitoring systems and strips for diabetics -- repeat customers, indeed. Cigarette smokers are also repeat customers, providing the same predictability for Philip Morris.

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.

6. Tons of cash flow
Philip Morris generated $7.1 billion in free cash flow in 2009. Over the six years for which financial information is available, it has averaged more than $5.4 billion annually.

5. High return on equity
Philip Morris not only throws off cash, but also earns a tremendous amount from its equity base. The company has an adjusted return on equity (ROE) far exceeding 40%, which it's maintained ever since separating from Altria. Only 31 companies trading on major U.S. exchanges (that aren't financials or energy companies) manage to throw off as much cash as Philip Morris, and still have a ROE greater than 20%.

IBM (NYSE: IBM) punched out more than $24 billion in free cash last year. Mining powerhouse Freeport-McMoRan Copper & Gold (NYSE: FCX) did all right producing $6 billion in free cash flow. Both have ROEs greater than 35%. While they may not have all the other things going for them that Philip Morris does, they may be worth looking at in their own right, based on these numbers alone.

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, should the dollar get weaker.

3. In top 100 highest-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 3 percentage points annually from 1957 to 2003. That may not seem like much, but it's really a big deal.

Since it was spun off, Philip Morris -- which is currently in the top-50-yielding S&P 500 companies -- has outperformed the S&P 500 index by 14.2 points. Duke Energy (NYSE: DUK) is also in the top 100 of dividend payers; it actually pays a higher dividend yield than Philip Morris, among several other intriguing attributes.

2. Commitment to pay the dividend
Management has often said that it plans to return value to shareholders, which it primarily does through its dividend. In the year-end earnings conference call, Chief Financial Officer Hermann Waldemer said, "We use our growing cash flow to enhance shareholder returns," just before pointing out that the company raised its dividend last September. Last summer, Waldemer stated that the company is committed to its target payout ratio of 65% -- in short, paying investors $0.65 of every dollar it makes in net income.

1. A large, secure dividend
You would think that payout ratio portends 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, thanks to the company's strong financial position and stable business. According to Standard & Poor's, 804 companies cut their dividend last year -- the highest level since S&P started collecting data in 1955. That included aluminum producer Alcoa (NYSE: AA);  after many years of steadily raising payouts, it slashed its quarterly dividend to just $0.03 early last year, when the demand for aluminum dried up. Philip Morris isn't subject to demand swings like that, so I expect it to still be paying its hefty dividend, uncut, many years from now.

Summing it up
All the companies I mentioned above are potentially great investments, enjoying many of the attributes I've listed. But each has at least two elements missing from my top 10 list:

Philip Morris stands unique among these contenders, qualifying on all 10 attributes. In my mind, that makes it a superior investment.

Even though it pays a great, stable dividend, Philip Morris is not a Motley Fool Income Investor newsletter pick -- not yet. But it would not surprise me to see it become one. It fits many of the criteria advisor James Early looks for: a growing dividend, a commitment to pay it, and the financial stability to continue doing so.

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

Jim Mueller owns shares of Philip Morris, but no other company mentioned. General Dynamics is a Motley Fool Inside Value choice. Philip Morris is a Global Gains recommendation. Duke is an Income Investor pick. While the Fool's disclosure policy doesn't like smoking cigarettes, it does like smoking dividends.