Given its extremely addictive qualities, tobacco is one product for which demand stays secure throughout time. It makes companies like Imperial Manufacturers (LSE:IMB) reliable dividend shares throughout all factors of the financial cycle.

As you’ll be able to see, this FTSE 100 operator has lifted dividends yearly for the reason that flip of the century, aside from in 2020 when payouts fell. Dividends plummeted by a 3rd, as pandemic uncertainty accelerated the agency’s debt-cutting plans.

But regardless of that lower, Imperial Manufacturers has been one of many Footsie’s biggest dividend progress shares in current occasions. And because the following graph exhibits, its dividend yields have often overwhelmed the index’s long-term common of 3-4%.

Encouragingly, Metropolis analysts anticipate dividends to maintain hovering over the short-to-medium-term too. However does this make Imperial Manufacturers a no brainer purchase for passive revenue buyers like me?

Spectacular forecasts

Forecasters anticipate dividend progress to proceed outpacing that of the broader FTSE 100. This additionally means Imperial Manufacturers’ dividend yields vary a hefty 6%-7% for the interval.

It’s vital to do not forget that dividends are by no means, ever assured. However on this case, I believe there’s an excellent probability of the corporate assembly present projections.

As talked about, the secure nature of tobacco demand gives it with wonderful income visibility and reliable money flows. Predicted dividends are additionally effectively lined by anticipated earnings during to 2027, offering one other layer of security. Dividend cowl ranges from 1.9 occasions to 2.1 occasions over the interval.

On prime of this, work to cut back debt ranges continues, with the enterprise focusing on a net-debt-to-EBITDA ratio of two occasions by monetary yr’s finish. This can give it firmer monetary foundations with which to pay extra market-beating dividends.

Time to purchase?

But regardless of its spectacular dividend prospects, I’m not tempted to spend money on Imperial Manufacturers immediately. It’s because its share price outlook by to 2027 and past is way much less safe. The corporate’s share price has dropped 16% over the previous 10 years and I consider it may proceed falling as tobacco consumption steadily declines.

Contemporary interims immediately (14 Might) underline the rising stress Imperial Manufacturers finds itself beneath. Tobacco volumes sank 3.2% within the six months to December, to 87bn sticks, which the agency stated mirrored “wider business market dimension declines throughout our footprint“.

On the plus facet, web revenues edged 0.7% increased, to £3.6bn, pushed by market share positive aspects and one other sturdy efficiency from its next-generation merchandise (NGPs). Web revenues amongst its blu vapourisers and different non-combustibles soared 15.4%.

However these declining stick volumes and additional NGP-related losses meant working revenue dropped 2.5% to £1.5bn. Hostile foreign money actions worsened the annual drop, one other fixed menace given the agency’s large geographical footprint.

As a possible investor, I’m involved that the strict laws hammering tobacco demand may additionally sap NGP gross sales sooner or later. And this might have extreme penalties for dividends in addition to Imperial Manufacturers’ share price.

So regardless of its shiny dividend forecasts to 2027, I’d fairly purchase different shares for passive revenue.