Philip Morris International (PM: NYE) has dipped below $90 per share. This could be an attractive entry point for income-focused investors, especially those considering covered calls to boost their returns.
Why Philip Morris Might be Appealing:
- High dividend yield: Philip Morris boasts a hefty dividend yield of over 5.5%, significantly higher than the S&P 500 average. This translates to a substantial passive income stream for shareholders.
- Solid track record: Philip Morris has a long history of increasing its dividend, having raised it annually for the past 10 years. This demonstrates the company’s commitment to rewarding shareholders.
- Defensive industry: The tobacco industry tends to be less volatile than the broader market, offering some stability for income investors.
Stock Target Advisor’s View on Philip Morris:
Stock Target Advisor takes a balanced stance on Philip Morris with 6 positive and 6 negative signals informing our neutral rating. Philip Morris’s low volatility may indeed act as a reassuring factor for cautious investors.
It suggests that the stock’s price movements are less drastic than the market as a whole. However, the downside is that it could also limit the potential for higher returns.
Key Considerations Before Investing in Philip Morris:
The following are the key considerations before investing in the Philip Morris
- Tobacco industry concerns: The tobacco industry faces regulatory and health-related challenges, which could impact PM’s future performance.
- Volatility: While generally defensive, PM’s stock price can still experience fluctuations.
- Covered call risks: Understand the potential drawbacks of covered calls before using this strategy.
Conclusion:
Investing in Philip Morris seems appealing at first glance with its high dividends and the stability of the tobacco industry. However, a detailed inspection uncovers foreseeable risks with overpricing and low revenue growth. Therefore, careful analysis and consideration are needed before making any investment decisions. In today’s volatile market, where change seems to be the only constant, comprehension of risks is as essential as the understanding of potential returns.
