Despite decades of scientific and observational evidence confirming the dangers of smoking, humanity’s love affair with cigarettes is an enduring one. The U.S. Centers for Disease Control and Prevention estimate that 18.1% of American adults smoke, and that’s abstemious compared to the rest of the world.

According to the renowned U.K. medical journal The Lancet, 3 billion people smoke worldwide, including half the adult men on the planet. It takes an efficient multinational corporation to take the tobacco from cultivation, to curing, to between the fingers of smokers worldwide. Enter New York-based Philip Morris International, Inc. (PM).

From London To Altria

First, a little background, because the various companies operating under the name Philip Morris and their parents and subsidiaries can be hard to keep straight. The company began as a London tobacco shop – you can probably deduce the name of its founder – in 1847. It went public in 1881 and incorporated in the United States in 1902. In 1985 Philip Morris expanded beyond tobacco by acquiring General Foods Corp., thus spurring the creation of a parent company for both entities. That parent company, confusingly, was christened Philip Morris Cos. Later, the parent company was renamed Altria Group, Inc. (MO). Today Altria is the parent of Philip Morris USA, which is not to be confused with Philip Morris International, which is not a subsidiary of Altria anyway. Well, it used to be, but in 2008 Philip Morris International was spun off as its own company, the subject of this article. As for Philip Morris USA, it’s simply Altria’s U.S. tobacco division, and otherwise unconnected to Philip Morris International.

What makes Philip Morris International unusual is that despite being headquartered in New York City, the company does business everywhere but the U.S. There are several reasons for this, one major one being the aftermath of the Tobacco Master Settlement Agreement of 1998, which ended up costing the four major U.S. tobacco companies $206 billion. That such an amount didn’t irreparably bankrupt the companies should give you an idea of how lucrative the cigarette business is. With the existence of separate Philip Morris companies catering to the United States and international markets, all the American litigation can be concentrated on one, allowing the other to operate somewhat freely around the globe. And operate it does – one out of every six cigarettes sold worldwide is a Philip Morris International product.

Huge Profits Abroad

Philip Morris International turned a gross profit of $21 billion in the last fiscal year. If you’re wondering why American tobacco companies don’t flex their muscle a little more strenuously when Congress increases regulations on the sale of cigarettes, it’s largely because the American market is relatively small. Philip Morris International sold 100 billion cigarettes in the rest of the Western Hemisphere last year, 185 billion in Western Europe, 300 billion in Eastern Europe, the Middle East and Africa, and another 300 billion in Asia.

Marlboro, Man

You’ve probably heard the folk wisdom nugget that states that the most valuable brand names in the world are Anheuser-Busch InBev.'s (BUD) Budweiser, Coca-Cola Co.'s (KO) Coke and Marlboro. Whether that statement is literally true or obsolete, Marlboro is unquestionably the most valuable brand under the Philip Morris International umbrella. The company shipped 291.1 billion Marlboro units last year, billing it as the world’s favorite cigarette brand. The familiar red and white package doesn’t begin to cover the extent of Marlboro variants across Philip Morris International’s markets. The company modifies the Marlboro brand slightly in different regions, offering a version with a recessed filter in Malaysia, a Japanese one with two capsules in the filter for “more choice in high cooling taste sensations,” a Mexican version that contains mint and clove, and an elegant black box with an automatic seal for smokers on the Arabian Peninsula. The Marlboro family’s regional share in all Philip Morris International markets has grown in each of the past two years, increasing 19% in Western Europe and 15% in North America just in 2013 alone.

From an investor’s standpoint, Philip Morris International disperses cash like so many smoke particles in a confined area. The company offers a 94¢ quarterly dividend, which with respect to the stock’s reliable price means a profound dividend yield in the neighborhood of 4.5%. Few multinationals, regardless of sector, offer anything in that neighborhood.

The Bottom Line

How to become a colossal multinational? Sell something that's of high quality, relatively inexpensive and highly addictive, and do it at huge margins. And when regulators or those who seek to ban your products turn their attention to you, assure them that you're doing your best to keep minors away. Execute all that in an efficient manner and wait for the money to roll in – regardless of the countless numbers of loyal customers who die from using your product every year.

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