Pm Farm
Tobacco farm. Source: Philip Morris International.

Many investors have grown increasingly worried about the long-term prospects for international tobacco company Philip Morris International (NYSE:PM). Even though the company maintains a strong market-share position in many key markets around the world, Philip Morris has had to deal with trends toward increased regulation in several countries as well as harmful currency impacts. Yet even with those concerns as a backdrop, Philip Morris delivered exactly what shareholders wanted to see this week: a dividend increase that finally pushes the stock's payout to the $1 per share mark quarterly.

On Wednesday morning, Philip Morris International announced that it would raise its dividend by more than 6% in its next quarterly payment. Investors who buy shares or hold onto their existing holdings through Sept. 22 will receive the $1 per share payout on Oct. 10. With the new payout, Philip Morris now boasts a dividend yield of 4.7%.

During its brief history as a publicly traded company, Philip Morris has demonstrated a consistent and impressive track record of dividend increases. The announcement marks the seventh time since mid-2008 that the company has distributed larger payouts to shareholders, and the new payout is well over double the $0.46 per share that Philip Morris paid investors in its first-ever dividend.

PM Dividend Chart

Philip Morris International Dividend data by YCharts

By itself, a seven-year streak of consecutive dividend increases doesn't rank among the top stocks in the market. But when you consider that former parent company Altria (NYSE:MO) sports a 45-year history of annual dividend increases -- when you adjust for the impact that the spinoff of Philip Morris and other former divisions had on payout amounts -- it's clear that the corporate history behind Philip Morris International consistently supports shareholders' right to share in the company's profits.

Yet not everyone was satisfied by the increase. Bloomberg had forecasted an even larger jump of about 8.5% to $1.02 per share, and the actual boost was far below the growth rate that Philip Morris has produced in the six years since it started trading as a separate entity. During each of the past two years, Philip Morris International's dividend increases topped the 10% mark, and 2011's boost was an even more impressive 20%.

Philip Morris pays out more of what its earns
Even if some investors are disappointed, though, Philip Morris International's increase is even more meaningful when you consider that the company expects earnings per share to fall this year from 2013 levels. With guidance of $4.87 to $4.97 per share, the new dividend represents an earnings payout ratio of more than 80%. That's not a cause for extreme concern at this point, especially given the strong cash flow that the company produces. But Philip Morris does need to get earnings moving back in the right direction for investors to expect further increases in future years.

Overall, Philip Morris International's dividend announcement is a positive one for shareholders. Nevertheless, investors need to keep an eye on the health of the overall business to see if it's consistent with the optimism that a dividend hike implies. If bad news comes, it could eventually jeopardize the dividend that investors value so much.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.