British American Tobacco Stock Offers High Dividend Yield and Upside Potential Despite Risks
-
British American Tobacco (BTI) is a large tobacco company with strong legacy cigarette brands and a 9.6% forward dividend yield. The stock looks undervalued and could be a safe harbor amid a potential market correction.
-
BTI has delivered consistent revenue growth and profitability over the past decade. The balance sheet is healthy to support the high dividend payout.
-
BTI is expanding into smokeless products like vapes, heated tobacco, and oral pouches as cigarette smoking declines. These products already have strong market positions.
-
Valuation multiples and dividend discount model suggest BTI is substantially undervalued, with 46% upside potential. The dividend is likely safe.
-
Risks include long-term cigarette volume declines and potential issues with BTI's acquisition strategy, including large write-downs. The stock has underperformed the broader market recently.