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Msg  13171 of 13178  at  9/16/2021 8:35:51 AM  by


PM acquisitions and dividend

PM announced yesterday they have completed the acquisition of Fertin Pharma, which makes nicotine pouches and other oral nicotine products.
Today they announced they have now purchased nearly 75% of outstanding Vectura shares, the UK firm specializing in inhalation technology. Since they are now the majority shareholder in Vectura and all other conditions have been met, their offer for Vectura under UK law becomes unconditional and the remaining shareholders will now be forced to sell as well.
Those two acquisitions, plus the purchase of US drug inhalation company OtiTopic in August, likely completes their acquisitions in the Beyond Nicotine space for a while. While each of these companies in relatively small and none are expected to be material to sales or earnings in the near term, they clearly give some interesting possibilities for future growth. 
Earlier this week, PM also announced their annual dividend increase, going from $4.80 up to $5.00 per share, or a 4.2% increase. With PM expecting to earn around $6.07 per share in 2021, the $5.00 dividend represents approximately an 82% payout of their 2021 earnings. That is still higher than their long term goal, which in the past they stated was 65% of earnings, but that payout rate was significantly exceeded over the past decade due to negative currency impacts negating much of PM's earnings growth.
They haven't repeated or stressed that 65% payout rate for some time now, and I think they are probably comfortable staying somewhat above that. However, I think another year or two of dividend hikes that are below the earnings growth (which hopefully will continue to be double digit growth) is likely. However, once that is passed, PM could and likely would resume hiking dividends annually in line with earnings growth.

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