British American Tobacco PLC's Dividend Analysis
Unpacking the Dividend Profile of British American Tobacco PLC
British American Tobacco PLC (NYSE:BTI) recently announced a dividend of $0.74 per share, payable on 2024-05-07, with the ex-dividend date set for 2024-03-21. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into British American Tobacco PLC's dividend performance and assess its sustainability.
What Does British American Tobacco PLC Do?
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Following the acquisition of Reynolds American, British American Tobacco is neck-and-neck with Philip Morris International to be the largest listed global tobacco companyslightly larger than PMI on net revenue, but slightly smaller on total tobacco volume. British American Tobacco's Global Drive Brands are Dunhill, Kent, Pall Mall, Lucky Strike, and Rothmans, and it also owns Newport and Camel in the U.S. The firm also sells vapor e-cigarettes, primarily its Vuse brand, heated tobacco, with Glo, as well as Velo modern oral tobacco products. The company holds 29% of ITC Limited, the leading Indian cigarette-maker.
A Glimpse at British American Tobacco PLC's Dividend History
British American Tobacco PLC has maintained a consistent dividend payment record since 1984. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down British American Tobacco PLC's Dividend Yield and Growth
As of today, British American Tobacco PLC currently has a 12-month trailing dividend yield of 9.37% and a 12-month forward dividend yield of 9.59%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, British American Tobacco PLC's annual dividend growth rate was 3.10%. Extended to a five-year horizon, this rate stayed the same. And over the past decade, British American Tobacco PLC's annual dividends per share growth rate stands at 5.40%.
Based on British American Tobacco PLC's dividend yield and five-year growth rate, the 5-year yield on cost of British American Tobacco PLC stock as of today is approximately 10.92%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, British American Tobacco PLC's dividend payout ratio is 0.62.
British American Tobacco PLC's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks British American Tobacco PLC's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported a net profit in 9 out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. British American Tobacco PLC's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and British American Tobacco PLC's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. British American Tobacco PLC's revenue has increased by approximately 2.90% per year on average, a rate that underperforms approximately 70.45% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, British American Tobacco PLC's earnings increased by approximately 4.20% per year on average, a rate that underperforms approximately 61.36% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 4.60%, which underperforms approximately 45.71% of global competitors.
Next Steps
In conclusion, British American Tobacco PLC's consistent dividend payments and moderate growth rate in dividends per share indicate a stable income stream for investors. The manageable payout ratio coupled with a decent profitability rank suggests that the dividends are sustainable in the near term. However, the growth metrics, including revenue and EPS growth rates, indicate that British American Tobacco PLC may face challenges outperforming its peers in the future. Investors should consider these factors alongside the company's strategic initiatives and market position when evaluating the long-term prospects of their investment. For those seeking high-dividend yield opportunities, GuruFocus Premium users can screen for such stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
