Tobacco giants like Philip Morris International, Inc. (NYSE: PM) and others may be facing some catch-up on the international regulations front. Russia’s possible smoking ban in public places could easily just become the latest nation which would crimp the number of places where people can smoke. If approved in its entirety, Russia could be joining the long list of nations which have a combination of some smoking bans and limitations on tobacco advertising. While this is not breaking news and while it has been a known risk, what happens to tobacco stocks when more and more large nations have restrictions on smoking?
Some other major countries which have partial bans in place have been Australia, Brazil, Canada, France, Italy and others. Whether or not they are enforced is another issue entirely. The question to ask is if Russia would really enforce the laws enough in any manner to make a noticeable difference. If you have not been to a bar (or in a taxi cab) in Russia, let’s just nicely say that smokers won’t be chased out of any establishments in Russia. It is also not exactly a secret that Russian business owners pay for “protection” in certain matters.
Most nations are very unlikely to ever go for the real jugular when it comes to smoking. The conflict of interest comes from the issue that smoking does generate billions of dollars in global taxation revenues. Any time a nation needs to raise more money chances are high that they can do it by adding more tobacco taxes through time.
Any large nation placing restrictions or bans on tobacco is not merely a Philip Morris story. The reason it matters here so much is that Altria Group Inc. (NYSE: MO) separated this company out entirely and Philip Morris International Inc. (NYSE: PM) is exclusively a play on the international tobacco market.
The good news for Philip Morris International is that other nations in general tend to not be as litigious as America. The bad news is that those same nations may look for more retribution as their healthcare costs rise.
It may also sound like good news that Philip Morris is now yielding 4.0%, but that is not good if you bought in recent months. At $31.10, the 52-week range is $27.00 to $36.29. Altria is way off of its highs too and its yield is back up to 5.6% due to selling pressure on the higher dividend stocks.
JON C. OGG