British American Tobacco (BTI) sees stock gains and strong fundamentals despite lower yield

From Yahoo Finance: 2025-06-24 19:52:00

British American Tobacco (BTI) has gained 51% in the past year, driven by investor demand for reliable dividend income amidst lower interest rate expectations. Despite a decrease in yield from 10% to 6.1%, BTI’s strong fundamentals suggest further upside potential. The core combustible business, including brands like Camel and Lucky Strike, saw a return to growth in the U.S. with organic sales nudging up 0.1% at constant rates.

Despite global smoking rates dropping, BTI’s ability to raise prices and maintain margins showcases its pricing power. CEO Tadeu Marroco highlighted cost savings of £402 million in 2024 to counter inflationary pressures. BTI’s pivot to new categories like vaping and heated tobacco products is also gaining traction with an 8.9% organic revenue jump in these segments.

After a 57% rally, BTI still trades at a forward P/E just under 11, making it an attractive valuation for investors. The company has raised its dividend for 29 consecutive years and continues to generate strong cash flow. Despite a bearish sentiment on Wall Street, BTI’s low valuation, strong income profile, and capital return strategy provide a compelling case for continued upside.

BTI’s core combustibles business remains resilient, while growth in smokeless products signals a forward-looking pivot. Regulatory challenges and the transition to next-gen products may pose obstacles, but BTI’s global footprint and disciplined capital strategy position it well for investors seeking reliable yield.

Read more: British American Tobacco (BTI) Leverages 6.1% Yield to Extend Railly