Company in the news: British American Tobacco
While tobacco stocks have proven remarkably resilient, how well will British American Tobacco cope with the threat from e-cigarettes, asks Phil Oakley.
Tobacco share prices have been subdued over the last year. Given the damage that tobacco does to people's health, you don't hear many complaints when governments get tough with the manufacturers. But as an investor, there's always something to worry about fewer customers, higher taxes, advertising bans, the black market and the new threat of e-cigarettes.
Until now, tobacco firms have remained remarkably resilient in shrugging off these concerns, partly because they've kept on increasing prices and also paying bigger dividends. But how long can this last?
E-cigarettes (which give users a smokeless dose of nicotine) are much cheaper than conventional ones, which could wreak havoc in the market. British American Tobacco (LSE: BATS) isn't taking any chances.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
![https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg](https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748-320-80.jpg)
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
It became the first tobacco company to launch an e-cigarette in July and is rumoured to be selling a nicotine inhaler in future. With regulation coming in from 2016, some doubt whether smaller firms will be able to compete alongside the bigger ones, which puts BAT at an advantage. With decent exposure to Asia, where smoker numbers are still growing, it may outperform its Western rivals.
At 3,276p, the shares yield 4.4%, with dividends expected to grow by 7%-8% over the next couple of years. Tobacco shares aren't for everyone and look riskier than they were, but BAT still looks a decent bet for income-seekers.
Verdict: buy
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Skipton launches a retirement bond with monthly income – is it any good?
The building society has launched a new three-year fixed-rate bond for those aged 66 and over. Can it boost your retirement income?
By Katie Williams Published
-
Pensions: 140,000 pensioners to be hit by surprise tax demand
Tens of thousands of pensioners will be written to over the summer because their pensions have gone above the frozen income tax thresholds
By Chris Newlands Published