British American Tobacco (LSE: BATS or NYSE ADR : BTI ) - Attractive 8.6% dividend yield and trades at a low forward P/E of 7.5 but price lowest since 2020

British American Tobacco is one stock that I am vested in and it is down to the lowest level since 2020. However, it is showing some incredible positive financial numbers that put our lousy S-REITs to shame.

First of all , its fwd yield of 8.6% is greater than its fwd PE of 7.56

Market Cap $72.30B

EPS (FWD) $4.31

Div Rate (TTM) $2.68

Payout Ratio :62%

FCF yield of 15%+

Revenue Y/Y +7.7%

EBITDA Y/Y +1.7%
CFO Y/Y +7.0%
EBITDA FWD +3.1%

BTI's payout ratio is 62% today, the lowest payout ratio of the tobacco giants.

$BTI's debt to equity ratio has reduced from 81.1% to 56.3% over the past 5 years.

Debt is well covered by operating cash flow (24.4%).Interest payments on its debt are well covered by EBIT (7.4x coverage).

Profitability

Profit Margin	24.10%
Operating Margin (ttm)	42.17%

Management Effectiveness

Return on Assets (ttm)	5.01%
Return on Equity (ttm)	9.57%

Income Statement

Revenue (ttm)	27.66B
Revenue Per Share (ttm)	12.26
Quarterly Revenue Growth (yoy)	9.50%
Gross Profit (ttm)	22.85B
EBITDA	12.19B

Book Value Per Share (mrq)

33.80

British American's Growth Rates Since 2016 

• Dividend: 4.5% annual growth
• Sales: 5.6% annual growth
• Earnings: 6.4% annual growth
• Operating cash flow: 9.8% annual growth
• Free cash flow: 10.7% annual growth.

Dividend data from seeking alpha:

In British Pounds, BTI has been paying rising dividends every year for 23 years. It's a global aristocrat and in 2025, will become a dividend champion. 

 

British American has a BBB+ credit rating. Nothing in BTI's fundamentals justifies its 11% decline in the last month or 17% YTD decline. British American Tobacco is now the most attractive stock in the consumer staples space. The price is falling far more than future consensus expectations and is continually revealing more value.

 

However, there are no risk-free companies, and no company is right for everyone. You have to be comfortable with the fundamental risk profile.
 
BTI's possible risk factors to be cautious
1)Regulatory risk (global and US) - plain packaging laws, menthol ban, nicotine level regulation, RRP tax policies, RRP approvals
2)Currency risk
3)Interest rate risk: rolling over debt at potentially much higher interest rates