Philip Morris CR shareholders yesterday approved a 2000 gross dividend of CZK 940 per share. The net dividend is CZK 799 per share for Czech tax residents. The stock now trades ex-dividend. The company is to payout only 80% of its 2000 net earnings per share (CZK 1,173), which is less than last year’s dividend payout ratio (85%) and less that our expectation of a 95% payout ratio. The undistributed remainder will be allocated to retained earnings, which together with 1999 retained earnings will reach CZK 1,085 mil. Company management explained the decision to increase retained earnings by citing the forthcoming (as of July 1, 2001) change in the Czech cigarette excise-tax structure. According to the management, the transition from government tax stamps to a multitude of retail price stamps will complicate their inventory management and will raise their financing needs.
Given that the record date for dividends has passed, we have changed our short-term recommendation from buy to accumulate. In spite of the lower pay-out ratio, the approved dividend still represents an attractive gross dividend yield and we remain positive regarding the outlook for Philip Morris CR and maintain our long-term accumulate recommendation.
(Ondřej Daťka)