ZACKS·2026-03-10 00:41Core Viewpoint - Big tobacco stocks, particularly British American Tobacco and Philip Morris International, are considered attractive investments during economic downturns due to stable demand, strong cash flows, and high dividend yields [1][14]. Company Performance - British American Tobacco and Philip Morris have both seen significant growth in smoke-free products, with British American known for brands like Dunhill and Lucky Strike, while Philip Morris is recognized for Virginia Slims and Marlboro [2]. - British American Tobacco's annual earnings are projected to increase by 5% this year to $4.89 per share, with a further 9% rise expected in FY27 to $5.32 [9]. - Philip Morris is expected to see an 8% increase in top line revenue in FY26, reaching $47.14 billion, with annual earnings projected to spike 12% in FY26 to $8.45 per share, and a further 9% increase in FY27 to $9.27 [10]. Dividend Attractiveness - British American Tobacco has a notable annual dividend yield of 5.62%, while Philip Morris offers a yield of 3.46%, both exceeding the S&P 500 average of 1.11% and the consumer staples sector average of 3.14% [3]. - Both companies maintain strong cash positions, each carrying over $4 billion on their balance sheets [3]. Recent Performance & Valuation - Over the last three years, Philip Morris' stock has increased by over 100%, while British American Tobacco's total return is 96%, both outperforming the S&P 500 and the consumer staples sector [4]. - British American Tobacco trades at 11X forward earnings at $58 per share, while Philip Morris trades at 20X forward earnings at $173 per share, both below the benchmark's 22X forward earnings multiple [5]. Market Outlook - Economic uncertainty, particularly due to geopolitical tensions, has led to increased interest in reliable, high-dividend stocks like British American Tobacco and Philip Morris [14]. - Recent EPS revisions for both companies have been positive, contributing to a Zacks Rank 2 (Buy) rating [14].