Margin expansion, sales growth, and a reliable dividend payment make the stock a good bet for volatile times. By Jacob Sonenshine

Philip Morris International has proved it can move new products through the Food and Drug Administration's authorization processes. With margins expanding thanks to smokeless tobacco products and sales growing for its traditional combustible products, the stock's ability to satisfy investors looks equally reliable. A stable and growing dividend also helps the case for Philip Morris stock as a relative haven in a volatile market.

For context, the company is transitioning from a traditional tobacco supplier to one that sells smoke-free and reduced-risk products. Of its $43.4 billion in total sales that analysts expect for 2026, according to FactSet, nearly half — $19.1 billion — is forecast to come from smoke-free offerings.

In June, the company launched "Zyn Ultra," the latest iteration of its tobacco-free nicotine pouches. Zyn Ultra is similar to Altria Group's "on! PLUS," and an important part of Philip Morris' strategy to capture market share for these types of products. The FDA this week said many of the company's Zyn products, though not yet Ultra, could be marketed with a modified risk claim. The market treated this as a setback, sending shares down more than 1% on Wednesday.

Investors might not have anticipated the need to add more risk claims, but the end result — that Philip Morris can sell and market the products in the U.S. — is a net positive. Its smokeless U.S. business went from near zero a few years ago to roughly 6% of total revenue in this year's first quarter. It can grow more from here.

"The U.S. is a small contributor but an important growth market," writes Morningstar analyst Kristoffer Inton.

Philip Morris' other fast-growing products, namely its IQOS heated tobacco product that heats — but doesn't burn — a reduced amount of tobacco, are in good regulatory standing. In April, the FDA renewed the company's authorization to sell and market several IQOS products that have reduced exposure to the toxins in cigarettes.

Philip Morris is well-established in this "heat not burn" product market, which Grandview Research says should grow 36% annually, from $20 billion in 2023 to more than $165 billion by 2030. Philip Morris is responsible for more than 75% of heat-not-burn product volumes sold globally, management said on its first-quarter earnings release. The company grew smoke-free shipments (which encapsulates all nontraditional cigarettes) slightly more than 9% year over year in 2026's first quarter, driven by nearly 12% international growth.

These numbers don't even do the story full justice. Growth should soon look even faster than in the quarter, given that U.S. volumes dropped 21.2% on the back of inventory declines. Retailers had increased inventory in the fourth quarter after a shortage for a few years, which meant they didn't need as much inventory to start this year. But U.S. inventory levels will normalize, and they should return to growth next year, according to consensus forecasts compiled by FactSet.

Despite the slowdown in growth, some analysts emphasize that underlying demand looks strong, given short-term inventory dynamics. "Overall performance was a standout" in the first quarter, wrote Stifel analyst Matthew Smith.

Analysts expect smoke-free sales to grow 12% in 2027 to $21.4 billion. That would bring total sales to $46.2 billion, corresponding to just over 6% growth. The legacy "combustible tobacco" revenue is growing in the low-single digits globally on the back of consistent price increases, even as volumes decline.

The smoke-free business carries higher gross margins, so its faster growth is why analysts forecast the company's overall gross margin to rise marginally, from 68% to almost 69% by 2027. Competitor Altria had an almost 65% overall gross margin in its first quarter.

That means Philip Morris can achieve close to double-digit annual earnings per share growth for the long term. Already, it grew adjusted EPS by 12% annually for the two years ended in 2025.

This could bring the stock higher in line with that growth, as long as the current price-to-forward-earnings multiple is reasonable. In fact, at just over 19 times earnings, the multiple could rise to something in the high 20s — it was 23 times as recently as early 2025 — so the stock could rise faster than earnings.

A main risk is increased regulatory scrutiny for the smokeless tobacco products so important to the company's growth and margins. While this week's FDA decision is ultimately positive, it demonstrates that regulatory approval is unpredictable, at the least.

The company pays out most of its earnings in the form of dividends, but cash flows are strong enough to still leave cash to invest in the business. Right now, expected dividends for the coming four quarters yield just over 3%. Overall, the total annual return of stock price gains plus dividends could come out to over 20%.

Buy the stock. We've smoked this company out.

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