2024-04-04 14:36:08 ET
Summary
- BTI's absurdly high yield and low P/E suggests either a dividend cut or permanent stagnation.
- But I see the exact opposite scenario.
- I see robust cash flow, strong financial strength, terrific profitability, and healthy growth potential,.
- It is thus a compelling opportunity for contrarian investors.
~10% yield and ~6x P/E are just absurd
Believe me, I understand why tobacco stocks are so out of favor in recent years. The main topic for today, British American Tobacco ( BTI ), provides a good example. As seen in the chart below, BTI's price suffered a 15.62% loss in the past year, while the overall market has one of the best rallies. BTI, together with other tobacco stocks, is indeed facing a number of challenges, including decreasing smoking rates, shifting consumer preferences, regulatory pressures, etc....
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British American Tobacco: 10% Yield, 6x P/E, Don't Overthink It