Darren Sissons British American Tobacco BTI-N PARTIAL SELL Aug 26, 2025

Bit of a dividend trap, though not the worst one. Dividend is quite nice, safe. Revenue growth is slow, either negative or very low. Not much future. Could buy short-term for the dividend, but his outlook is more long term. Yield is 8.5%.

It was in a downtrend, then formed a base and breakout. Generally a breakout is a good thing but it can still pull back.

One of the real drivers is the substantial dividend and he sees it as a bond proxy. The long term dividend yield is about 45% along with some growth.

Pays a high 8% dividend and doesn't slide (as much) when markets do. BTI is moving away from traditional smoking. The stock has enjoyed a good run in recent years and is buying back shares. Good at current levels, but not for ESG investors.

Total return also benefited from the currency differential. Up significantly, time to trim -- especially with inflation and potential unemployment spike.

The sector has been re-rated somewhat, and investors are anticipating lower interest rates going foward. In its recent earnings release, BAT indicated organic revenue growth would land at the top of its 1-2% range. Though not a formal guidance raise, the comment implies modest improvement. However, organic operating profit guidance was held at 1.5-2.5% -- a clear sign the company will continue investing in its next generation platform. With consumers adopting new products quickly and competition intensifying, sustained R&D is essential. To fund this, BAT must keep maximizing profits from its traditional cigarette business, now aided by a recovery in US revenues, the first positive result since 2022. The company maintained it guidance on currency, with a transactional headwind of 1.5% and translation hit of 4%. Consensus now sees adjusted EPS declining mid-single digits, partly offset by share buybacks. Valuation has gone from about 8X earnings to 12X earnings, with the dividend now 5.01%. Business is improving somewhat, but the usual risks remain. We would consider the 72% one-year gain 'a bit much' here and certainly would not expect these returns to be sustainable. While we would still consider it a solid income stock, we would be fine taking some off the table. 
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