3 Reasons to Buy British American Tobacco Stock Like There's No Tomorrow

Industry Overview - Despite declining cigarette usage, the tobacco industry remains strong in 2025, with consumers shifting to emerging products like oral nicotine pouches and electronic devices [1] Company Performance - British American Tobacco (BAT) has shown resilience by focusing on innovation and high-growth categories, with the stock returning 31% over the past year [2] - BAT operates in over 150 countries and is known for iconic cigarette brands like Dunhill, Lucky Strike, Newport, and Camel [3] - The company is progressing toward becoming a predominantly smokeless business by 2035, with 18% of revenue from new categories in H1 2024, up from 6% in 2017 [4] - BAT's Vuse brand is the global market leader in rechargeable vaporizers, while glo holds the No 2 position in heated products [4] - Velo nicotine pouches are a major growth driver and market leader outside the US [4] - In H1 2024, BAT achieved 7 4% organic constant currency revenue growth from new categories, offsetting a 2 6% decline in traditional cigarettes [5] - Adjusted EPS increased 1 3% YoY, with climbing operating margins [5] - BAT expects low-single-digit organic revenue and adjusted profit growth in constant currency terms for full-year 2024 [5] - Management anticipates progressive improvement into 2025 and mid-single-digit profitable growth by 2026 and beyond [6] Valuation - BAT shares trade at a forward P/E ratio of 7x 2025 consensus EPS, significantly below peers Altria (10x) and Philip Morris International (17x) [7] - The discounted valuation may be due to BAT's global profile and reliance on emerging markets, contrasting with Altria's US focus and Philip Morris' success with Zyn in the US [8] - BAT's diversified global footprint is a strategic advantage, providing flexibility to adapt to evolving regulations and consumer preferences [9] Dividend - BAT offers an industry-leading 8 2% dividend yield, supported by significant free-cash-flow generation [10] - The company has a 25-year track record of consecutive dividend increases, with management committed to continued dividend growth [10] Outlook - 2025 is expected to be a significant year for BAT as it builds momentum with its smokeless product lineup [11] - The company is well-positioned to deliver positive returns over the next several years and is a good option for diversified portfolios [11]