My income-focused pick for 2026 is Philip Morris International Inc. (PM). At first glance, it’s the classic “bond-like” tobacco giant. But what makes PM especially interesting for this year is how that familiar income profile is now underpinned by a very real transformation toward smoke-free products, writes Nikolaos Sismanis, analyst at Sure Retirement.
Yes, PM is mature, cash-flow-rich, and shareholder-friendly. But it gives you both that sturdy yield and real growth optionality. At its recent share price around the high-$140s, PM offered a dividend yield close to 4%, and yet, adjusted EPS is expected to grow by a tremendous 14%.
The company has raised its dividend every year since its spinoff in 2008, including this past September’s increase that marked its 17th consecutive annual hike. What makes PM way more compelling than a “typical” high-yield stock is how quickly the underlying business mix is changing.
Smoke-free products (IQOS heated tobacco, ZYN nicotine pouches, and other reduced-risk offerings) recently contributed about 39% of total net revenues, with that figure likely to be more this year. Two forces are driving this trend: IQOS and ZYN.
The 2022 acquisition of Swedish Match gave PM outright control of ZYN, the leading US oral nicotine pouch brand. ZYN’s volumes have been explosive. Plus, the FDA has scheduled a Jan. 22, 2026 advisory panel to review Swedish Match USA’s application to market ZYN as a lower-risk alternative to cigarettes under the US modified-risk framework.
A positive outcome would not just be a marketing win, but it would further entrench PM’s position in one of the most profitable smokeless categories globally. Meanwhile, IQOS is still scaling worldwide. PM regained full rights to commercialize IQOS in the US after its long-standing arrangement with Altria ended, giving the company a massive, largely untapped profit pool in the world’s largest nicotine market.
There are, of course, real risks, including regulatory scrutiny of nicotine, pricing oversight, and the execution challenge of shifting adult smokers into alternatives. But for 2026, I view PM as a rare income vehicle where a near-4% yield is anchored by resilient cash flows today – and enhanced by a credible, already-profitable growth engine in smoke-free products.
Recommended Action: Buy PM.
