Where Will Ultra-High Yield British American Tobacco Be in 5 Years?

Core Viewpoint - British American Tobacco (BTI) offers a high dividend yield of 8.1%, significantly higher than the S&P 500's 1.2% and the average consumer staples' 2.6%, attracting income-focused investors [1][8] Company Overview - British American Tobacco is one of the largest cigarette manufacturers globally, with combustible products making up around 80% of its revenue in the first half of 2024, primarily from cigarettes [2] - The company has a truly global presence, unlike its main competitors Altria and Philip Morris International, which operate primarily in North America [3] Volume Trends - Cigarette volumes have been declining, with a 5.1% drop in 2022, 5.3% in 2023, and a 6.8% decline in the first half of 2024, indicating a worsening trend [4][5] - If the decline continues at a rate of 5% annually, volumes could fall from 250 billion units in 2024 to less than 200 billion by 2029, posing a significant challenge for the company [6][7] Pricing Strategy - The company has managed to offset volume declines through price increases, but there is a limit to how much prices can rise without negatively impacting sales [5] New Categories - British American Tobacco is investing in new categories such as vaping and smokeless tobacco pouches, which saw a volume increase in the first half of 2024, although this segment still represents less than 3% of total revenue [8][9] Investment Risks - The high dividend yield is attractive, but the ongoing declines in cigarette sales present substantial risks, making it unsuitable for conservative dividend investors [10]