Philip Morris, the maker of Marlboro cigarettes, has shown a persistent dividend income over a period of time compared to Imperial Tobacco that has been persistently cutting its dividends to hold cash to increase its descendent trending operations.
The tobacco company has shown a great increase in its income due to growth in snus and fine-cut tobacco and besides this it achieved revenue growth in several important regions.
Diversified operations on growing emerging and Asian markets helped British American Tobacco to receive the highest in the pure profit metric. British American Tobacco has a 65 percent cash ratio supported with a healthy free cash flow, which places it in a better position to provide the stated amount of dividend income.
Cigarettes price increase in the USA and a recession in the European creates an disadvantageous conditions for tobacco business.
Imperial Tobacco is much more exposed to the developed markets because on these markets tobacco use is commonly denounced. Lower demand on these markets leaves the tobacco company more vulnerable to obstacles for making business. Philip Morris and British American Tobacco are well positioned in the growing emerging markets and may easily control the demand declines.
The tobacco use declining is explained by increase in use of tobacco alternatives. For example, British American Tobacco is the first tobacco company to produce tobacco alternatives such e-cigarettes. The company invests big money in tobacco products of latest generation in order to add sustainability to its operations.
Besides this, Imperial Tobacco and Philip Morris also study the opportunities in the tobacco-alternative industry. However, British American Tobacco here has a larger market share and in comparison with its major competitors is better poised for long-term growth.