On Feb. 2, Philip Morris reported fourth-quarter and full-year results that were boosted by the strong performance of its reduced-risk products, which the company argues present less risk of harm than continued smoking to consumers who switch to these products.
In all, Philip Morris' revenue for its reduced-risk product line rose to $343 million in the fourth quarter -- up from $55 million in the first quarter -- and totaled $733 million in 2016.
Philip Morris is wise to invest in products that are less harmful for its customers, as its traditional-cigarette sales volumes continue to decline, with shipments down 4.1% in 2016. However, these tobacco products are still likely to have at least some negative health effects, and they will therefore face long-term growth challenges as more and more consumers choose to live healthier lives.
Still, thanks in part to tobacco's addictive qualities, Philip Morris is likely to maintain its ability to consistently raise prices. That could help to offset falling unit sales, as it did in once again in 2016. As such, Philip Morris is likely to continue to reward shareholders with a solid dividend-income stream in the years ahead.
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