British American Tobacco's (BTI) stock has rebounded over 10% since October, confirming the upside due for it at the time. Its latest trading update is encouraging for the stock too, with full year 2024 guidance affirmed and prospects of higher profitability for the new categories segment. The stock's forward P/E is also competitive compared with peers and the forward dividend yield is robust too.
As 2024 comes to a close, British American Tobacco's (BTI 0.05%) stock is sitting on a roughly 25% year-to-date price gain. That's a pretty rapid advance, particularly for a company that is largely viewed as an income investment, with most of the rally happening over a six-month period, between April and September.
The recently introduced Glo Hilo shows BTI is listening to consumer feedback. The company is getting more innovative and is starting to launch great products that could lead to growth. BTI launched Glo Hilo in Serbia as a test market, and it looks like a winner. The two-piece device solves many pain points consumers had with previous generations. The new Glo Hilo devices feature improved weight, size, heating technology, session time, and battery life, positioning them to compete more effectively against Philip Morris' IQOS.
If you're a dividend investor, you've likely considered buying British American Tobacco (BTI), if you don't own it already.
The market is back to record highs, and many investors are worried about putting new money to work. Combining maximum yield with maximum total return optimizes current yield and future retirement income without sacrificing medium- to long-term returns. These six aristocrats offer a 4.6% yield, 14.1% long-term income growth, 19% upside in the next year, 44% in the next two years, and 117% in the next five years.
I'm seeking 6%-plus yielding blue-chip bargains for my family's portfolio, with a focus on long-term income growth and minimal volatility. My ZEUS Family portfolio strategy involves annual rebalancing and screening for undervalued, high-quality stocks with strong fundamentals and risk management. I'm considering five blue-chip alternatives to Enbridge, offering 7% yields, 6-7% annual dividend growth, and 13-14% long-term income growth.
Yields have started to come down within most yield-driven segments. The risk is that we fall back into a yield-starvation era. In my view, income-oriented investors have to be bold and lock in high yields now, while they are still available.
Where Will Ultra-High Yield British American Tobacco Be in 5 Years?
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.
Tobacco industry leaders like PM, MO and BTI are investing heavily in smoke-free products to align with health trends and regulatory shifts. Despite declining cigarette sales, strong pricing power and RRP growth support a sustainable outlook.
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.