Where Will British American Tobacco Be in 5 Years?

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]