Should You Forget Philip Morris International and Buy This Unstoppable Growth Stock Instead?

There are a lot of things to like about Philip Morris International (NYSE: PM). But some things aren't so attractive, which is why some investors might want to consider alternatives. One alternative has a higher yield, an incredible dividend history, and looks like it is on sale today. Here's why Philip Morris International may not be the best dividend stock for you today, and why there is an attractive replacement to consider.

The problem with Philip Morris International

The first issue that investors need to tackle with Philip Morris International is its business. It basically provides customers with a way to consume nicotine, which is an addictive substance. Historically, that has come in the form of cigarettes, but the delivery methods have changed and diversified over time. Still, this is a so-called "sin stock," and if that bothers you, well, you shouldn't buy it.

That said, Philip Morris International is further along than its closest peers in the diversification process. Roughly 39% of its revenue comes from smoke-free products, accounting for about 40% of the company's gross profit. While Philip Morris International is still a tobacco company, it is executing exceptionally well through a transition period for the tobacco sector. That's good news, if you don't mind owning a "sin stock."

However, there's another little wrinkle here. Wall Street is well aware of how well Philip Morris International is executing. The stock has dramatically outperformed its peers in recent years. And it currently has a price-to-earnings (P/E) ratio of about 35, which is well above its five-year average P/E ratio of roughly 18 or so.

Data by YCharts.

While Philip Morris International's 3.2% dividend yield is above the consumer staples average of roughly 2.5%, you can do better than that without looking too hard. A good alternative right now is PepsiCo (NASDAQ: PEP).

PepsiCo has more to offer than Philip Morris International

PepsiCo has proven to be an unstoppable dividend growth machine. It is a Dividend King with 53 consecutive annual dividend increases under its belt. The yield is currently around 4%. And it doesn't fall quite as hard into the "sin stock" category.

To be fair, PepsiCo is facing some headwinds right now. Notably, the snacks, beverages, and packaged food products it sells are under pressure from a push toward healthier food options. The snack category, where PepsiCo is the largest player in salty snacks, is particularly weak at the moment. This is an issue to watch, but the truth is that consumer tastes are always changing. PepsiCo has proven over time that it can adapt as needed, and it is highly likely to do so again this time around.

On that score, it just completed the purchase of Mexican American food company Siete. That broadens its product lineup in both snacks and packaged food in a way that is "on trend." It has also agreed to buy Poppi, which makes prebiotic soda. That's in keeping with the health-conscious shift taking shape. Basically, PepsiCo is laying the foundation for better days.

Data by YCharts.

But Wall Street is very negative on this consumer staples giant right now. PepsiCo's 4% or so yield is near the highest levels in the company's history. Its P/E ratio is around 20, below its five-year average of nearly 27. Note, too, that the 20 P/E is far below the 35 P/E at Philip Morris International.

If you're looking for a good dividend stock, go with PepsiCo

Overall, Philip Morris International is an attractive tobacco company because of how well it's executing relative to its peers. But investors know how well it's doing and have priced it accordingly. If what you want is an attractively priced dividend growth stock that has proven itself over the long term, you'll be better off with PepsiCo -- and you'll even get a higher yield along the way.

Should you invest $1,000 in Philip Morris International right now?

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Reuben Gregg Brewer has positions in PepsiCo. The Motley Fool recommends British American Tobacco P.l.c. and Philip Morris International and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.