It’s no secret that many popular stocks are down significantly in a down market beset by tariff and trade war fears, but not all stocks are down. Tobacco and smokeless tobacco products giant Philip Morris International (PM), the parent company of brands including Marlboro, L & M, and Chesterfield is enjoying a banner performance in 2025 as investors flock to this defensive dividend stock.
I previously wrote about Philip Morris International last year when the stock traded for $98.25 per share. The stock has performed exceedingly well since then, now trading above $150. I remain stoutly bullish on Philip Morris International based on its recent outperformance, reasonable valuation, appealing dividends, history of dividend growth, and impressive momentum with its smoke-free products like ZYN, which will give the company an attractive growth driver going forward. Most importantly, the stock is a stalwart safe haven amid troubling macroeconomic headwinds.
Trouncing the Broader Market
Philip Morris is showing its mettle as a defensive dividend stock by vastly outperforming the broader market during market turmoil. Philip Morris is up 29% year to date, while the S&P 500 (SPX) is down 10.4% over the same time frame. Despite all the tariff-induced sell-offs, PM stock has held up more than most in the U.S. stock market.
Philip Morris is showing its strength during this volatile period, and investors are flocking to its relative safety. Consumers who smoke cigarettes or use smokeless tobacco products aren’t going to suddenly quit just because of tariff concerns or the slowing economy. These are products that customers buy on a routine and habitual basis, putting a company like Philip Morris in a strong position to weather a downturn.
Reasonable Valuation for a Safe Haven Stock
The strong recent performance, coupled with the broader market’s decline, means Philip Morris is no longer trading at a steep discount to the broader market. However, it’s not particularly expensive either, as it trades roughly in line with the S&P 500.
Analysts expect the tobacco giant to earn $7.19 a share in 2025, and the company trades for 21x these estimates, compared to about 19.5x for the S&P 500. While Philip Morris is no longer incredibly cheap, its valuation is reasonable, especially for a strong company that gives investors this type of certainty in a volatile market.
Plus, Philip Morris is still an attractive dividend stock. Even after accounting for its recent run-up, the stock still yields a solid 3.5%, significantly more than the sector average of 2.5%. Investors can expect Philip Morris’ dividend to continue growing over time. The company has grown its dividend payout for the past 16 years since it went public in 2009, at a decent 7% annualized rate over this timespan.
Full Steam Ahead Into a Smoke-Free Future
While the valuation and dividend are nice features of Philip Morris stock, perhaps the most exciting thing about the company is its strong momentum in smoke-free products like Zyn nicotine pouches and IQOS heated tobacco sticks. This puts the company in a strong position for a smoke-free future.
If, like me, you’ve noticed a lot more people are using Zyn lately, it’s not just anecdotal. The numbers back up the product’s mainstream success. In 2022, Philip Morris shipped 238 million cans of Zyn, accelerating to 384 million in 2023 and 581 million in 2024.
Overall, the company’s revenue from smoke-free products has grown by over $5 billion in just the past three years, from $9.3 billion in 2021 to $14.7 billion today. Revenue from these products now makes up 40% of Philip Morris’ revenue and will likely surpass 50% in the coming years, as it already has in many of the company’s top markets by operating income. That’s because revenue from smoke-free products grew by 16.7% last year versus a still-impressive 9.8% for the rest of the company.
Cigarettes Are Here to Stay
While the success of Philip Morris’s smoke-free products is a cause for plenty of optimism for the future, it’s not as if the company’s more traditional cigarette business is a melting ice cube. In fact, volume growth for cigarettes actually increased from 612.9 billion units in 2023 to 616.8 billion units in 2024.
The combination of future growth and upside provided by ZYN and the rest of Philip Morris’ smoke-free product portfolio with the continued resilience of its traditional cigarette business is a compelling mix for the company and its investors.
Is PM Stock a Good Buy?
Turning to Wall Street, PM earns a Strong Buy consensus rating based on eight Buys, zero Holds, and one Sell rating assigned in the past three months. The average analyst PM stock price target of $161.25 implies a ~5% upside potential from current levels.
Stalwart Defensive Stock Status
Philip Morris has been a star performer in a trying year for the market so far. Its defensive business model and products enjoy habitual and routine customer demand, which is likely to continue regardless of macroeconomic headwinds. I expect the stock to continue to do well going forward based on its reasonable valuation and attractive dividend yield, and the red-hot growth of its smoke-free products like Zyn serves as an added bonus, giving the company more growth than one might expect at first glance. Philip Morris is one of my largest holdings, and I look forward to holding the stock for a long time.