This Monster Dividend Growth Stock Is Up 86% in the Last Year

Philip Morris International (PM) has emerged as a standout performer in 2025, surging 86.1% over the past 12 months through April 30—a blistering pace that leaves most dividend stocks in the dust. What’s even more impressive is that this tobacco giant has done it while maintaining a 3.15% dividend yield, offering investors both capital appreciation and income. Let’s dissect what’s driving this monster stock’s rise and whether it can sustain its momentum.

The Growth Engine: Smoke-Free Innovation

PM’s turnaround hinges on its smoke-free business (SFB), which now accounts for 42% of total net revenues. Its flagship product, the IQOS heated tobacco device, dominates key markets:
- In Japan, IQOS holds 32.2% of the heated tobacco unit (HTU) market.
- In Europe, HTU market share rose to 11.4%, driven by strong growth in Spain and Germany.
- In the U.S., nicotine pouches saw 53.8% volume growth in Q1 2025, with shipments exceeding 200 million cans.

This transition isn’t just about diversifying away from combustible cigarettes—it’s about capturing a $100 billion addressable market for reduced-risk products. As traditional cigarette sales decline globally, PM’s focus on innovation is paying off.

Financial Firepower: Earnings and Dividends

PM’s Q1 2025 results underscore its financial strength:
- Adjusted diluted EPS rose 12.7% year-over-year to $1.69, with organic revenue growth of 17.3%.
- Operating margins expanded to 40.7%, a 2.5 percentage point improvement over 2024.
- The company reaffirmed its $5.40 annual dividend ($1.35 per quarter), which is fully covered by free cash flow.

This dividend consistency is critical. While PM trades at a 14% premium to Morningstar’s fair value estimate of $150, its 2-star rating doesn’t fully account for the secular tailwinds in its smoke-free segment.

Why the Surge? Three Key Catalysts

1. Market Share Gains: PM’s SFB division grew 20.4% organically in Q1, outpacing rivals. Its global travel retail division also saw double-digit growth, leveraging high-margin sales to smokers on the go.
2. Operational Efficiency: Cost-cutting in legacy cigarette operations and $11 billion in projected operating cash flow for 2025 provide a strong base for reinvestment.
3. Dividend Discipline: PM’s payout ratio remains below 60%, ensuring dividends are sustainable even if growth slows.

Risks on the Horizon

• Regulatory Headwinds: Flavor bans in the EU have hit markets like Italy, though PM is countering with new products like mint- and fruit-flavored nicotine pouches.
• Currency Volatility: A weaker U.S. dollar could pressure results in regions like Europe, though PM expects a $0.10 favorable impact in Q2.
• Valuation Concerns: At $171 per share, PM is no longer a bargain. Investors should focus on long-term trends rather than short-term dips.

The Bottom Line: A Dividend Growth Story Worth Buying

PM’s 86% 12-month return isn’t a fluke—it’s the result of a strategic pivot to high-margin, low-risk products. With smoke-free gross profit now contributing 44% of total margins and a 10.5%–12.5% EPS growth forecast for 2025, the stock remains compelling for income-focused investors.

While its premium valuation is a valid concern, the 3.15% yield provides a cushion, and the company’s track record of 202.96% 5-year stock growth (vs. 100.89% for the S&P 500) speaks to its execution.

For now, PM isn’t just a dividend stock—it’s a growth stock in disguise, capitalizing on a global shift toward safer nicotine alternatives. Investors who buy in today should focus on the long game: PM’s moat is widening, and its products are rewriting the rules of an industry.

Final Take: Philip Morris International is a rare blend of dividend stability and growth. At current prices, it’s not a steal—but for those willing to ride the smoke-free wave, it’s a buy.

This analysis is based on publicly available data as of May 2, 2025. Past performance does not guarantee future results.