“British American Tobacco (BAT), trading at €35.14 per share with a market cap of €77.45 billion and a 7.97% dividend yield, presents a compelling case for income-focused investors,” Ricardo Pillai wrote for Yahoo! Finance. “Despite modest growth expectations and ongoing regulatory risks, BAT’s strong cash flow, leadership in emerging categories like vapor and modern oral products, and attractive valuation make it an appealing defensive play. The stock trades at a forward P/E of approximately 7x, significantly discounted compared to peers like Philip Morris (PMI) and Altria, signaling potential undervaluation for a company with consistent earnings and robust dividend sustainability.”
Pillai said BAT’s strategy was to reduce dependance on combustible products, and pivot to being 50% smokeless by 2035. Its Vuse brand e-cigarette holds 40.3% value share of top markets, and is making strides with Velo in the modern oral market. Analysts are bullish on BAT’s future because it appears to be striking a middle ground that investors seek in terms of products and markets.
“The overarching investment thesis hinges on BAT’s ability to accelerate growth in new categories at a pace exceeding the decline of its smoke products,” Pillai said. “While the strategy is ambitious, its execution thus far has been promising. For investors seeking a reliable dividend stock with modest growth potential, BAT offers a stable and defensive portfolio addition. With regulatory challenges already factored into its valuation, the next financial release will be pivotal in confirming its strategic trajectory. BAT remains a ‘Buy for Income,’ not a growth play, but a compelling option for those prioritizing steady returns.”
