2024-04-03 19:00:00 ET
Summary
- British American Tobacco (BTI) has experienced a decline in shares over the past year and decade due to health risks and government regulations.
- Despite this, BTI has consistently generated over $10 billion in revenue and free cash flow on an annualized basis since 2018, with large single-digit dividend yields.
- The author believes that BTI is undervalued and sees it as a potential investment opportunity with strong fundamentals and a low valuation.
The previous 12 months haven't been kind to British American Tobacco ( BTI ) as shares have declined -14.91%, and it's been an even worse decade as shares have fallen -46.46%. The tobacco industry continuously finds itself under pressure as it's synonymous with health risks and government regulations. Despite individual opinions, the facts are that BTI has exceeded $10 billion in operating income and free cash flow ( FCF ) on an annualized basis since 2018 while generating large single-digit dividend yields. When I look at BTI from a business perspective, it looks tremendously undervalued, and I have recently added it to my position. Just like Altria Group ( MO ), I feel the perception of BTI's business and not its actual operational performance is the reason why shares have not caught a bid. While technology controls the narrative and has fueled the rally, I think the broad market will catch up over the next year, and BTI will be looked back on as an opportunity that got away rather than continuing to be a value trap. I will continue adding to my position at these prices and happily sit back and collect the dividends while I wait for my investment thesis to unfold. ...
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British American Tobacco: Yielding 9.63% Looks Like An Opportunity Rather Than A Value Trap