British American Tobacco Announces a Share Buyback. Here's What Investors Need to Know.

Core Viewpoint - British American Tobacco (BAT) is currently seen as a potential investment opportunity despite its past stock performance, primarily due to its share repurchase strategy and attractive dividend yield [4][9][11]. Share Repurchase Strategy - BAT has repurchased 150,000 shares at an average price of approximately $32, which is part of a broader plan to reduce the share count using proceeds from the sale of its stake in Indian conglomerate ITC [1][6]. - The company plans to continue repurchasing shares through the end of 2025, indicating management's confidence in the stock's future performance [6]. Financial Performance and Valuation - The stock has fallen nearly 50% over the past decade, contrasting sharply with the S&P 500, which has more than doubled during the same period [9]. - BAT's forward P/E ratio is currently between 6 and 7, suggesting that the stock is reasonably valued given its expected earnings growth of 4% annually [11]. - The company sold 555 billion "sticks" in 2023, down from 756 billion in 2017, reflecting a long-term decline in smoking rates [10]. Dividend Yield - BAT offers a high dividend yield of 9.6%, supported by dependable cash flows and a dividend payout ratio of about 50%, which instills confidence in the sustainability of its dividends [8]. Market Outlook - Analysts suggest that investors looking beyond BAT's historical performance may find an excellent opportunity, with potential total returns estimated at 13% to 14% annually [11][16]. - The stock could transition from being a laggard to outperforming the market, driven by its strategic initiatives and improved valuation metrics [12][16].