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British American Tobacco: Don't Bet Against Big Tobacco Just Yet

Baronport Capital profile picture
Baronport Capital


  • BTI is a well-structured, inflation-resistant, and deep-moated business that remains a free cash flow dividend-oriented machine still undervalued and somewhat misunderstood by the market.
  • Recent developments have not been too kind to the company, as the market still struggles to digest several mounting headwinds that have been positioning themselves against the London-based firm.
  • While there is little arguing that the golden age of the industry is most certainly behind it, British American Tobacco still carries a couple of good aspects in my view.
  • The market gave investors yet another chance to buy shares in the tobacco company for just less than 7.0x its free cash flow while collecting checks on an 8.00% dividend.

Teenage girl is lying down and smoking cigarette

praetorianphoto/E+ via Getty Images

British American Tobacco (NYSE:BTI) (OTCPK:BTAFF) is a well-structured and inflation-resistant business that possesses a deep moat and remains a free cash flow dividend-oriented machine that is still undervalued and somewhat misunderstood by the

This article was written by

Baronport Capital profile picture
Baronport Capital provides independent equity research operated by a long-term-oriented value investor with a bottom-up fundamental approach. He is passionate about investing and finance. He has subscribed to the ideas and principles of value investing, whose philosophy was influenced by the lives and works of Charlie Munger, Howard Marks, Seth Klarman, and others.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BTI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (40)

BTI has been in the RED for the last 10 years or longer. Almost as bad as T. Buy them for the dividend only because growth will not happen.
AlphaElephant profile picture
Thank you for this article. It’s timely, as it reminds me to buy some more BTI the next time it falls under $35. Hopefully that is soon.
arthur_bishop1972 profile picture
@AlphaElephant How bout today?? I added at 34.74
@arthur_bishop1972 me too started a position at $33.55. I can’t believe it got this low!
Gregg Rosenberg profile picture
Big fine for evading sanctions,

Why don't we want to encourage our enemies to be heavy smokers? This is so stupid.
No Guilt profile picture
@Gregg Rosenberg

Hypocritical government
bobtis profile picture
What value of the Pound to the US dollar. Cutting the return.
Twobeerjohn profile picture
Does BTI pay American taxes? Does it pay the buyback tax? How does it work?
@Twobeerjohn British Company so zero witholding tax on dividends and no tax on buybacks.
Just bought 6500 shares of BTI at $36.49, insured for free, w/help of options, of course!
Same way I did with XOM almost 3 years ago (bot 2000 at $33.96, and sold a week ago at $114.50)!
Voice of reason! Thank you.
I've MO also. When the medical field wakes up to nicotine carrying medicines into the body via vapes, it'll be an even better place to be!
Holding. Enjoying the dividend, would like to enjoy some substantial capital appreciation.
stronghobbit profile picture
@jbadilla23 why? This is not what you wish for with a high yielding stock.
rickevantodd profile picture
Excellent article. Long MO & PM for years. Maybe the perceived regulatory risk is due to their reliance on sales of menthol products?
Tellurium128 profile picture
7.5% is a "near double digit" dividend yield?
@Tellurium128 Forgot the div growth rate, and the very low p/e?
Greenhorn Investor profile picture
Like the dinosaurs in Jurassic Park, Big Tobacco will find a way.

Thank you for the article
xKaotic profile picture
BTI is fine but I prefer MO & UVV for my tobacco allocation.
I've been a buyer. The smokeless cigs are def something in the right direction. I don't have an issue with meatless meat so why isn't this a good thing?
Flannelsg profile picture
@auzadventure Better analogy with meatless meat is smoking without tobacco or nicotine. Both products would then be useless + harmful.
cfrd profile picture
FDA rejection stalls a bigger U.S. revenue stream to counter menthol cig problems....hi debt is a reason to not buy this ....PM and MO are the best bet for this year
Dividend Ambassador profile picture
@cfrd pM has same level of debt after buying the Swedish matchmaker
arthur_bishop1972 profile picture
@cfrd Disagree with your conclusion. They suspended buybacks to help pay down debt. At $35, this was/is a STEAL.
Dividend Ambassador profile picture
@arthur_bishop1972 Listen to Arthur. He is correct. BTI at $35 is the ultimate example of an unlocked and unguarded candy store. You can just walk in and take as much as you want. They never run out until they do. I’m embarrassed to admit how greedy I have been. I hope there aren’t any surveillance cameras. When the candy store is finally locked a lot of people are going to be furious with me about how many shares I stole from Morons bailing on BTI at PE 7.
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