BTI - British American Tobacco: Undervalued With Bearish Assumptions 10% Dividend
2024-03-21 18:44:06 ET
Summary
- British American Tobacco (BTI) is the largest tobacco company in the world, with a large moat, making it difficult for new tobacco brands to enter the market.
- Despite declining smoking trends, BTI remains profitable and offers a high dividend yield of 10%, making it an attractive investment option.
- Buybacks can unlock short-term value, and a successful transition towards smokeless products can lead to multiple expansions.
British American Tobacco p.l.c. ( BTI ) ( BATS ) is the largest tobacco company in the world by revenue followed by Philip Morris International Inc. ( PM ) and Altria Group, Inc. ( MO ). The company has a rich history going back to the 19th century, and it has survived two world wars while still paying dividends to shareholders. The company started back in 1902 when the British Imperial Tobacco Company and the American Tobacco Company started a joint venture called British American Tobacco. The current company is a result of a big acquisition of Reynolds for $47B in 2017 . The acquisition made them into largest tobacco company in the world today, with brands like Newport, Lucky Strike, and Pall Mall.
The company is selling tobacco brands across the entire world, but still makes about 50% of its profits from the USA. Traditional cigarette smoking is in a slow secular decline, but a lot of people still choose to smoke and will probably continue to do so over the next decade. The company is generating a lot of cash from these activities, reporting over $10b in free cash flow in FY2023....
British American Tobacco: Undervalued With Bearish Assumptions, 10% Dividend