Philip Morris International Stock Advances on Smoke-Free Strategy and Increased Dividend

Philip Morris International Stock Advances on Smoke-Free Strategy and Increased Dividend

U.S. equities saw Philip Morris International Inc. (NYSE:PM) demonstrate notable performance, with the company's stock advancing significantly in 2025, concurrently with an increase in its quarterly dividend. This trajectory underscores the firm's strategic pivot towards its smoke-free product portfolio and its commitment to shareholder returns.

Strong Performance and Enhanced Shareholder Returns

Philip Morris International (PMI) has been identified as one of the best-performing dividend stocks in 2025, with its stock experiencing a surge of nearly 36% since the beginning of the year. Earlier in 2025, as of June 2, PMI stock had jumped 51.1% year-to-date, substantially outperforming the S&P 500 Index, which was up approximately 0.4% over the same period.

On September 19, 2025, PMI's Board of Directors approved an 8.9% increase in its regular quarterly dividend, raising the payout to $1.47 per share from the previous $1.35 per share. This adjustment brings the annualized dividend rate to $5.88 per share, providing a current yield of approximately 3.338%. The new quarterly dividend is scheduled for payment on October 20, 2025, to shareholders of record as of October 3, 2025, with the ex-dividend date also set for October 3, 2025. This marks the 17th consecutive year of dividend increases for PMI since becoming a standalone public company in 2008, representing a cumulative increase of 219.6% and a compound annual growth rate of 7.1%. As of September 19, 2025, the company's market capitalization stood at approximately $251.79 billion, with a P/E ratio of 30.69.

Strategic Shift Drives Market Reaction

The robust stock performance and consistent dividend growth are largely attributed to PMI's strategic focus and significant success in its next-generation, smoke-free product offerings, particularly IQOS and ZYN oral nicotine pouches. These products, including ZYN acquired through Swedish Match, are central to the company's long-term growth strategy.

PMI's financial health also benefits from an upward revision in its adjusted earnings per share forecast for fiscal year 2025, now ranging from $7.43 to $7.56. Management anticipates organic net revenue growth of 6% to 8% and organic operating income growth of 11% to 12.5% for 2025. Capital expenditures are projected at approximately $1.6 billion, predominantly allocated towards investments in smoke-free offerings and advanced technologies.

Broader Context and Future Implications

The smoke-free business segment has become a substantial contributor to PMI's overall financial profile. In the second quarter of 2025, smoke-free products accounted for 41% of total net revenues and over 42% of total gross profit, representing an increase of 2.9 and 3.8 percentage points, respectively, compared to the prior year. The segment demonstrated strong growth, with shipment volumes increasing by 11.8%, net revenues growing by 15.2% (14.5% organically), and gross profit rising by 23.3% (21.5% organically).

IQOS, a key heat-not-burn product, achieved over $3 billion in quarterly net revenues and gained 1.0 percentage point in combined cigarette and heated tobacco unit industry volumes, reaching 9.2%. ZYN oral nicotine pouches experienced reaccelerated U.S. off-take growth, with a 26% increase in the second quarter in the United States. Globally, IQOS maintains a 77% market share in the heat-not-burn category, while ZYN dominates over 60% of the U.S. nicotine pouch market. Smoke-free products are now available in 97 markets, and PMI has invested over $14 billion since 2008 in their development and commercialization.

While the company's payout ratio based on Operating Free Cash Flow (OFCF) in Q2 2025 was 182%, significantly up from 99% in Q2 2024, PMI projects a recovery in the second half of 2025, forecasting full-year OFCF of $11.5 billion, signaling an expected improvement in dividend coverage by year-end.

Management Outlook and Regulatory Landscape

PMI's strategic pivot aligns with evolving global health trends and regulatory environments. CEO Jacek Olczak has emphasized the need for "pragmatic policies" to accelerate consumer access to smoke-free products, noting that a significant portion of global smokers still lack access due to restrictive laws. This highlights the company's proactive stance in navigating a complex regulatory landscape while pursuing its vision of a smoke-free future.

Looking Ahead

Investors will continue to monitor PMI's ongoing transition away from traditional combustible products towards its smoke-free portfolio. The company projects its total shipment volumes to grow around 1% in 2025, driven by a 12% to 14% increase in smoke-free products, which is expected to offset an approximate 2% decline in cigarette volumes. Key factors to watch include further developments in regulatory frameworks for smoke-free products, the pace of adoption in new and existing markets, and the company's ability to maintain strong profitability margins from its innovative offerings. The sustained growth of IQOS and ZYN, coupled with strategic capital allocation towards smoke-free investments, will be crucial for PMI's long-term financial performance and its ability to continue delivering robust shareholder returns.