British American Tobacco Stock News

Where Will Ultra-High Yield British American Tobacco Be in 5 Years?

Want Decades of Passive Income? 3 Stocks to Buy Right Now.

I'm buying BTI aggressively in 2025 due to its 8% yield, 6% growth plan, and 36% upside return potential. BTI's dividend is potentially very safe, supported by a strong balance sheet, stable cash flow, and a 65% payout ratio policy. BTI's RRP portfolio is growing rapidly, with management expecting 35% of sales from RRPs by 2030, doubling non-smoking customers.

I issued a bullish rating on British American Tobacco in early 2024, driven by a near double-digit yield and strong fundamentals. Since then, the Stock has outperformed the market. Despite the gains, the yield remains attractive at 8.5% and P/CF multiple below 6x.

Each month, in the DK Top Buy list, I present my top 5 buy ideas and what I would buy if I were starting from scratch. I swapped two overvalued Ultra SWANs for two new Ultra bargains targeting 3% yield and 20% CAGR income growth. The Fantastic Five offers a 3.1% yield, 20% CAGR long-term income growth, 30% upside in a year, 76% in 2 years, and 165% in five years.

Recent developments, especially the updates provided on BTI's recent Capital Market Day, have led us to reexamine the stock. Despite progress in new categories, rapid decline in combustibles and slow growth in new products raise concerns about future profit stagnation. Despite a low FWD P/E of 7.5x, we consider the stock fairly priced given the gloomy growth potential.

With a huge 8.4% dividend yield, British American Tobacco throws off a lot of passive income, but there are risks to consider.

This article is part of our monthly series where we highlight five large-cap, relatively safe, dividend-paying companies offering large discounts to their historical norms. We go over our filtering process to select just five conservative DGI stocks from more than 7,500 companies that are traded on U.S. exchanges, including OTC networks. In addition to the primary list that yields about 3.35%, ...