This Tariff-Proof Dividend King Is Up 70% in the Last Year. Time to Buy?

There's no ignoring it. President Trump's tariffs and trade threats are roiling the markets, sending the S&P 500 into a correction for the first time since 2022. The tariffs announced today were just the latest move fueling investor uncertainty.

Meanwhile, consumer sentiment is rapidly falling, and businesses are increasingly fearful as the manufacturing sector just fell into a contraction, according to the March ISM survey. Much of the economy is at risk from tariffs and the impact of a weakening economy. For example, the AI stocks that had driven the bull market of 2023 and 2024 have pulled back substantially, even though their direct exposure to tariffs is limited.

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However, there are some safe stocks available to ride out the trade war disruption, and one of the best out there is Philip Morris International (NYSE: PM), which is insulated from the tariff uncertainty in a number of ways and also has strong track record of growth. Not only is the stock up 69% over the last year as of April 2, but it's also a reliable dividend payer with a dividend yield of 3.4% currently. Including its history before it split from Altria in 2008, the stock is a Dividend King, having raised its dividend payout every year for more than 50 years. Here are a few reasons why Philip Morris is well positioned to avoid the tariff noise.

1. U.S. exposure is limited

Philip Morris' divorce from Altria in 2008 set clear boundaries for the two companies. Altria would operate in the U.S., and Philip Morris would sell the same set of cigarette brands, led by Marlboro, in international markets.

Today, that divide remains, though Philip Morris has gained modest exposure to the U.S. through its acquisition of ZYN parent Swedish Match, and it recently began selling IQOS, a heat-not-burn tobacco product, in the U.S. The company does nearly all of its business outside of the U.S., and it's well-insulated from American import tariffs or even a U.S.-driven trade war.

The company sources tobacco from around the world, including the U.S., though there's minimal export risk there. In its most recent earnings call, CEO Jacek Olczak addressed concerns about tariffs, saying that its supply chain is set up regionally so it manufactures nearly all of the ZYN oral nicotine pouches it sells in the U.S. domestically.

Given the structure of the company's supply chain, the reliance on a global commodity like tobacco, and its focus on international markets, Philip Morris seems well protected from U.S. tariffs.

2. It's a recession-proof product

Even if Philip Morris were exposed to tariffs, tobacco is a consumer staple, meaning that it's a product that consumers buy regardless of the economic environment. Not only that, but tobacco has proven its price inelasticity, time and again.

Despite significant excise taxes in some parts of the U.S., for example, demand for the product has been resilient. Philip Morris International also has a history of raising prices on its products, and it's received little push-back. Its pricing power is evidenced by the wide operating margins that it, Altria, and others in the tobacco industry enjoy.

Even if a trade war sparks a global recession, Philip Morris should be much better-positioned than most companies to weather it and continue to grow.

Image source: Getty Images.

3. Recent results have been outstanding

If you think tobacco is a declining industry, you should take a look at Philip Morris' recent results.

Overall revenue in 2024 rose 7.7% to $37.9 billion, while revenue from its smoke-free business, which includes ZYN and IQOS, rose 14.2% to $14.7 billion.

While Philip Morris is still growing cigarette volumes, the company has successfully diversified from traditional tobacco to next-gen products like ZYN and IQOS, which now generate 40% of revenue and 42% of its gross profit, as of the fourth quarter.

The stock's recent performance is evidence of its strong results as the 69% jump over the last year shows the business is clearly executing. Even without the worries about tariffs, Philip Morris looks well-positioned for long-term growth based on the pivot to newer products.

Is Philip Morris a buy?

Putting the volatility around tariffs aside, Philip Morris looks like a strong buy candidate, considering its solid top-line growth, wide margins, and newer growth products. For investors looking to diversify away from the U.S. or to neutralize tariff risk, Philip Morris seems like an ideal choice.

The stock rose 2% in March even as the S&P 500 fell 5%, and Philip Morris is up 30% year-to-date, a standout winner in a down year.

For a recession-proof stock that offers growth, income, and protection from tariffs, it's hard to find a better choice than Philip Morris International.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.