Early this year I issued an article on British American Tobacco (NYSE:BTI) arguing that the multiple is so low that it provides an inherent safety in terms of keeping the downside risk limited. Plus, the argument was that so depressed multiple warrants a very enticing entry point for investors to capture high yielding dividend streams. In addition, looking at the underlying business profile it was clear that the business is at a much safer position than what could be implied by the multiple (i.e., P/FCF of ...

Still, with thousands of publicly traded opportunities available, there are compelling hidden gems that occasionally sprout up. We're talking about companies that offer high yields – more than 7% — and yet are tied to relevant businesses. If you're ready to take the risk, below are three high-yield dividend stocks to consider. Not everything is so enticing about RIO stock, I must say. In particular, Rio only pays out on a semi-annual basis. Therefore, it's not the best platform if you're seeking to pay your ...

Core Viewpoint - British American Tobacco (BTI) is facing challenges in its traditional cigarette business due to declining volumes, but it is experiencing strong growth in its new generation products (NGP) segment, which may provide future opportunities for profitability [1][6][13] Industry Overview - The tobacco industry is highly regulated, with significant risks such as the proposed ban on menthol cigarettes in the US, which could impact BTI's profits as over 20% of its US profits come from menthol products [7] - The proliferation of illegal vapes in the US market poses a challenge, taking up to 60% of the vape market, but regulatory enforcement against these products could create opportunities for compliant players like BTI [7] Earnings and Growth Drivers - BTI has warned of lower revenues in the first half of 2024 due to continued declines in cigarette volumes and the rise of illegal vapes [2] - Despite volume declines, BTI has managed to increase its volume share, indicating effective market share maintenance [2] - Analysts suggest that BTI may still have room for price increases in the US market to offset volume declines, with a current pack price of $9 compared to $26 in higher tax countries [2] - The company has seen profitability in its NGP segment two years ahead of target, with expectations for further profitability growth as economies of scale are realized [6] Dividend Information - BTI currently offers a dividend yield of over 9.5%, the highest among major tobacco players, with a 5-year dividend growth rate of just under 3% [8][9] - The strong cash flows at BTI suggest that the dividend is unlikely to be reduced in the near term, although significant growth in dividends may be limited due to the decline in traditional cigarette sales [9] Valuation - BTI is trading at a forward P/E ratio of just under 6.6, the lowest among major tobacco players and approximately 20% below its 5-year average [10][12] - The lower valuation may be justified by regulatory uncertainties and declines in traditional cigarette volumes, but growth potential in NGPs could improve valuation multiples [12] Conclusion - Despite uncertainties in the tobacco industry and declining traditional cigarette volumes, BTI presents an attractive investment opportunity due to its growth in NGPs, potential regulatory benefits, attractive valuation, and substantial dividend yield [13]

Core Insights - The U.S. nicotine market is experiencing a significant regulatory shift, particularly concerning illegal vaping products [1][3] - British American Tobacco (BTI) is positioned to benefit from the crackdown on illegal disposable vapes and the current product shortages faced by its competitor Zyn [5][8] Industry Overview - The U.S. has seen a surge in new nicotine products, including e-vapor devices and nicotine pouches, with traditional tobacco companies investing in this space [2] - The vaping sector has been disrupted by the rise of disposable devices, which, despite being illegal, have captured substantial market share [2][4] Regulatory Developments - The FDA and Department of Justice are collaborating with law enforcement to remove illegal vaping devices from retail shelves, which may lead to increased compliance among stores [4] - Previous government announcements have had limited impact due to the profitability of these illegal products, but enforcement actions are expected to change this [4] Company Performance - British American Tobacco's vapor segment reported a 27% revenue growth in 2023, with the new nicotine products generating $4.22 billion in revenue last year [5][6] - The nicotine pouch segment grew by 39% last year, indicating strong market potential [6] Financial Outlook - The new nicotine products segment is nearing profitability, with projections suggesting it could reach close to $10 billion in annual revenue in the coming years [7] - British American Tobacco's free cash flow per share has increased by 20% over the last five years, with current free cash flow per share at $5.30, comfortably covering its dividend of $2.90 [8] Investment Considerations - The company is expected to grow its dividend significantly over the next decade, making its stock attractive for income-focused investors [9]

Core Insights - British American Tobacco is facing a significant decline in its core cigarette business, particularly in the U.S. market, which is described as being in a "terminal decline" [3][6] - The company has acknowledged a troubling shift in how it accounts for its U.S. cigarette brands, now assuming they will be worthless in approximately 30 years [7] - The non-cigarette business has grown to represent 17% of total sales, with a goal to increase this to 50% by 2035, indicating management's efforts to diversify [4][10] Financial Performance - Cigarette production has decreased from around 700 billion in 2018 to 555 billion in 2023, marking a 21% decline, with projections suggesting further declines to approximately 445 billion over the next five years [8][11] - The company has been offsetting volume declines by raising prices, which has supported a high dividend yield of 9.6% [9][11] - The non-cigarette division is now profitable at the division level, which may facilitate further investment in this area [10] Future Outlook - The next five years are critical for British American Tobacco, as the balance between the decline of the cigarette business and the growth of the non-cigarette operations will determine the stock's performance and dividend sustainability [5][11] - If the company fails to make substantial progress in its non-cigarette business, the long-term viability of its dividend could be at risk [12]

Core Viewpoint - The article presents a bearish outlook on British American Tobacco (BTI), highlighting that macroeconomic factors are being used as distractions from the underlying secular decline in the industry and the company's performance [7][17]. Company Performance - BTI has recently underperformed against the S&P 500, with the analyst rating changing to 'Neutral/Hold' to reflect performance in line with the market index [5][6]. - The company is currently trading at a one-year forward price-to-earnings (PE) ratio of 6.58x, significantly below its historical average, indicating a potential value trap without a catalyst for change [10][19]. Industry Challenges - The U.S. combustible market, which constitutes 44% of overall combustibles and 34% of total revenues, is experiencing a slow recovery, attributed to persistent inflation and high interest rates [7][19]. - The illegal vaping market poses a significant challenge, with over 60% of vaping product revenue coming from illicit disposable e-cigarettes, complicating efforts to regulate and curb illegal supply [19][21]. Regulatory Environment - Recent legislative efforts in 20 states aim to tackle illicit vaping products, with some early signs of success in Louisiana, where enforcement legislation has been enacted [19]. - However, skepticism remains regarding the effectiveness of regulations in eradicating the illegal market, as historical patterns suggest that black markets tend to adapt and persist [19][21]. Strategic Outlook - The company's management has been criticized for attributing disappointing performance to external factors rather than addressing internal strategic weaknesses [21]. - A strong turnaround catalyst is deemed necessary for BTI to escape the current value trap, particularly through success in combating illicit vaping supply and revitalizing its smokeless product categories [10][17].

Time has shown that the one certainty in the stock market is uncertainty. Regardless of how experienced you are or how many advanced investing tools you have at your disposal, nobody can reliably predict how stock prices will move. 1. Altria Group Altria's stock has struggled quite a bit over the past few years, but 2024 has been a nice (and much-needed) turnaround, partly due to the success of non-tobacco products like NJOY. The biggest concern regarding Altria's business is the decline in smoking among U. ...

Core Viewpoint - Tobacco stocks, particularly Philip Morris International and British American Tobacco, are appealing for dividend investors, with Philip Morris being favored for its growth and transition to smoke-free products [2][20]. Business Model Comparison - Philip Morris International is recognized for its international cigarette brands and the IQOS heat-not-burn product, which accounted for 36.5% of its revenue in 2023 [2][12]. - British American Tobacco, known for brands like Camel and Newport, recently took a $31 billion write-down on its U.S. cigarette business, indicating a shift towards smoke-free products [3][12]. Financial Performance - Philip Morris reported a 13.7% increase in organic gross profit to $5.6 billion and a 22.2% rise in organic operating income to $2 billion [4]. - British American Tobacco's adjusted organic revenue rose 3.1% to £27.3 billion ($34.02 billion), with adjusted operating profit increasing 3.9% to £12.5 million ($15.5 million) [5]. Dividend and Valuation - British American Tobacco offers a higher dividend yield of 9.5% compared to Philip Morris's 5%, and BAT is cheaper with a price-to-earnings ratio of 6.7 versus Philip Morris's 16.9 [6][18]. Recent Performance and Growth - Philip Morris achieved an 11% increase in organic revenue to $8.8 billion in Q1, with significant growth in smoke-free products, including a 20.9% rise in heated tobacco units [15]. - British American Tobacco's new categories saw a 21% revenue increase, contributing to 12% of its total revenue [14]. Overall Assessment - Philip Morris is seen as the better stock due to faster growth and progress in smoke-free product development, despite British American Tobacco's advantages in dividend yield and valuation [17][20].

Core Viewpoint - British American Tobacco (BAT) has underperformed compared to the S&P 500 Consumer Staples Index, with a year-to-date increase of less than 2% against the index's 7.1% rise, and a significant 27% price decline in 2023 [2][3] Financial Performance - BAT's revenue growth for 2023 was in line with guidance, particularly driven by strong performance in new categories, which contributed to operating profits two years ahead of schedule, enhancing the operating margin to 45.7% [3][4] - The share of new categories in revenue increased by 1.8 percentage points to 12.3%, although still trailing behind Philip Morris, which has 39% from smoke-free products [4] Dividend and Valuation - The forward dividend yield is robust at 9.8%, with a current yield of 9.6%, indicating strong returns for investors [5] - The forward non-GAAP price-to-earnings (P/E) ratio stands at 6.6x, significantly lower than its five-year average of 8.7x, making it attractive compared to peers [6] Market Position and Growth Drivers - BAT's vape brand Vuse has improved its market penetration to 41% in key markets, up from 36% in 2023, indicating strong growth potential [7][8] - Velo, BAT's modern oral brand, has also seen an increase in market share, reaching 10.3% in key markets, up from 8.6% in 2023 [8] Regulatory Challenges - The US market, accounting for approximately 44% of BAT's revenue, poses significant challenges, including a 90 basis points decline in Vuse's value share due to the rise of illicit single-use vapes [9][10] - Regulatory actions, such as marketing denial orders from the US FDA, have impacted sales of popular products like Vuse Alto, complicating the transition to non-smokeable products [10] Future Outlook - BAT anticipates growth in new categories to be weighted towards the second half of the year, with expectations of low-single figure organic constant currency revenue growth for the full year [11] - Despite ongoing regulatory challenges, BAT's strong adjusted profit margins and attractive dividend yield support a positive outlook for the stock [11]

These dividend stocks look like great buys. British American Tobacco The Vuse brand of vaping products currently has a global value share of 41.1% in the company's key markets and a 51.5% share in the U.S. The glo brand of tobacco heating products enjoys a 16.8% volume share in key markets, and the Velo brand of modern oral products has a 27% volume share in key markets. The company expects volumes and revenue to accelerate across these businesses in the second half of the year. The company plans to spend 7 ...