However, it’s worth noting that high dividend yields aren’t always the most practical choice. Analysts generally suggest targeting dividend yields in the range of 3% to 6%, as this range typically offers potential for both dividend growth and appreciation in stock value. These factors also contribute to reducing risk, particularly during periods of market volatility.

Industry Overview: Declining Smoking Rates

The company is targeting 5 billion pounds (nearly $6 billion at current exchange rates) in income from next-gen products by 2025. Smoking rates have steadily declined around the world, especially in the U.S., due to health concerns and increasing regulations. Some companies have looked beyond tobacco, partnering with cannabis businesses to capture the potential growth in an industry that bears many similarities to tobacco. The tobacco industry fits this model, despite declines over time in the number of customers that use its products.

Industry Rank

Atria Investments Inc increased its holdings in shares of British American Tobacco by 19.5% in the first quarter. Atria Investments Inc now owns 74,416 shares of the company’s stock worth $2,270,000 after acquiring an additional 12,150 shares in the last quarter. Bluefin Capital Management LLC increased its holdings in shares of British American Tobacco by 50.0% in the first quarter. Bluefin Capital Management LLC now owns 12,300 shares of the company’s stock worth $375,000 after acquiring an additional 4,100 shares in the last quarter. Bayesian Capital Management LP increased its holdings in shares of British American Tobacco by 558.2% in the first quarter.

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Other institutional investors and hedge funds have also added to or reduced their stakes in the company. First City Capital Management Inc. increased its holdings in shares of British American Tobacco by 5.5% in the first quarter. First City Capital Management Inc. now owns 11,590 shares of the company’s stock worth $353,000 after acquiring an additional 600 shares in the last quarter.

• Altria has taken three writedowns on its Juul investment, and, as of September 2020, the stake was valued at just $1.6 billion.
• Before founding the firm, Steve spent time working in various finance roles in London and South Africa.
• Partnerships are not a recommendation for you to invest with any one company.
• New categories made up 12% of its revenue, and that share should continue to grow, given its 21% revenue growth rate in 2023.

Aurora Cannabis Inc. (NASDAQ:ACB)

The list is arranged in ascending order of the number of hedge fund holders in each firm. We see the payout ratio at 80% of earnings for this year, fairly typical for a tobacco company. Since capex is very low, substantially all of the company’s earnings https://investmentsanalysis.info/ translate to free cash flow, which can then be distributed to shareholders. Because of this, and the fact that Philip Morris should produce 3% annual earnings-per-share growth in the coming years, investors should have no dividend safety concerns.

Zacks Industry Rank Education — Learn more about the Zacks Industry Rank

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While income investors can still count on tobacco companies to deliver dividends, the path to growth in the industry is uncertain. The advantage of investing in British American Tobacco over Altria and Philip Morris is that it provides exposure to the tobacco sector worldwide rather than in just the U.S. or just internationally. The company also sells a wide range of products, including cigarettes, vaporizers, chewing tobacco, and heated tobacco. Buying shares of BAT is the easiest way to gain portfolio exposure to the whole tobacco industry via just one stock.

Leaf tobacco volumes fell slightly year-over-year, and the third quarter had demand pulled forward and inflated results for that period. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.

Since 1988 it has more than doubled the S&P 500 with an average gain of +24.03% per year. These returns cover a period from January 1, 1988 through July 1, 2024. Zacks Rank stock-rating Best tobacco stocks system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month.

Finally, it’s worth considering how both stocks have performed in the recent past, as rising stocks tend to continue rising, and falling stocks can have trouble rebounding. As a British company, British American Tobacco doesn’t report results quarterly, but we can make comparisons with its 2023 performance. On the bottom line, the company’s margin expanded, with organic gross profit increasing 13.7% to $5.6 billion, while organic operating income jumped 22.2% to $2 billion.

This strategy, though currently an isolated observation, could potentially deliver significant value to British American Tobacco’s investors. Considering the above, I undertook a rigorous screening process to identify three prudent consumer stocks. Methodologically, I looked for a mix of undervalued and low-beta assets, allowing investors to select from a basket of differentiated stocks. Although I screened for differentiated stocks, I left no stone unturned in ensuring each company’s fundamentals were in check. Moreover, I meticulously examined factors like valuation multiples, technical analysis and event-driven activities to ensure complete alignment. Discover dividend stocks matching your investment objectives with our advanced screening tools.

The stock also offers a healthy dividend yield of 5.1% of the share price. If its history as part of Altria were included, it would qualify as another Dividend Aristocrat. It has raised its dividend 56 times in the past 52 years, effectively making it a Dividend Achiever (an unofficial status because of its spinoff history). Management has set a target payout ratio of 80% of earnings per share, knowing that its dividend is the main reason that shareholders own the stock. Almost all of Altria’s sales come from the United States, where smoking rates have steadily declined over the past generation.