British American Tobacco (LSE: BATS) shares plunged 8% in early morning buying and selling (13 February) after the corporate posted blended outcomes for the yr ending 31 December 2024.

The tobacco big reported income of £25.87bn and an adjusted revenue of 362.5p per share. The outcomes barely missed expectations for income of £26.11bn however exceeded the anticipated revenue of 362.2p per share.

Total profitability was impacted by a £6.2bn cost associated to a long-standing lawsuit in Canada. The corporate expects additional regulatory challenges in Bangladesh and Australia this yr, affecting its flamable tobacco merchandise. Regardless of these headwinds, CEO Tadeu Marroco reaffirmed his confidence within the firm’s enterprise technique, forecasting modest income progress of about 1% in direction of the second half of 2025.

Further challenges have arisen within the US. Customers are steadily choosing cheaper various merchandise, particularly illicit disposable vapes. Nevertheless, British American highlighted a gentle restoration in market share and constructive developments in its nicotine pouch phase. The profitability of its next-gen merchandise has additionally improved, with revenues surpassing expectations.

Chief monetary officer Soraya Benchikh believes the corporate’s on monitor to satisfy its 2025 outlook of low-single-digit natural income and adjusted revenue progress. 

“We are committed to maximising sustainable value from our combustibles business while driving growth in our New Categories through innovation and premiumisation,” she stated.

Dividend worth

With a superb monitor file of offering constant dividends, it’s lengthy been a favorite of British earnings buyers. For many years, it’s maintained a big market share and continues to broaden its numerous product portfolio. The addition of next-gen merchandise positions it nicely to realize a significant share within the evolving nicotine market.

Lately, the important thing attraction for the corporate is the dividends. Whereas many different shares keep the same yield of round 7%, it’s backed up by many years of progress and dependable funds. In earlier years, the inventory supplied worth by way of capital appreciation however that has modified since 2017.

The price has made little headway previously 5 years, up only one%. In the identical interval, the yield’s elevated nearly three-fold. For buyers that favor the consistency of dividend earnings, it’s clear to see the attraction.

Regulatory considerations

As ever, there are dangers to investing within the inventory. Regulatory adjustments stay the important thing problem, as they’ve for years. The tobacco business faces more and more stringent restrictions world wide, all of which might influence gross sales and profitability.

Naturally, such rules intend to lower dangerous tobacco use, an endeavor that British American recognises as mandatory. That is mirrored in its pricey makes an attempt to transition to next-gen merchandise. Sadly, there’s no assure such a transition will ever be worthwhile and the corporate could proceed to lose cash.

On high of this, present and future authorized circumstances associated to well being considerations and environmental points proceed to threaten its monetary stability. Some would like to see tobacco deemed unlawful however, traditionally, prohibition has seldom led to a sustainable answer.

Mockingly, the corporate stands out as the one finest positioned to cut back any hurt it’s answerable for. For earnings buyers constructive a few transition to smokeless merchandise, I feel the dividend monitor file alone makes it a inventory value contemplating.