4. British American Tobacco p.l.c. (NYSE:BTI)
Dividend Yield as of July 16: 11.48%
British American Tobacco p.l.c. (NYSE:BTI) ranks fourth on our list of the best dividend stocks with over 10% yield. The company specializes in the manufacturing of cigarettes, tobacco, and various other nicotine products. Tobacco companies are transforming their strategies amidst declining smoking rates in the US. BTI has diversified its product lineup by introducing new offerings in its New Categories segment, which includes alternative tobacco and nicotine products beyond traditional cigarettes. This shift aims to cater to evolving consumer preferences and regulatory changes by providing innovative and potentially less harmful smoking alternatives. By 2023, the New Categories segment not only achieved profitability but also demonstrated ongoing revenue growth driven by increased volume, especially from brands like Vuse and Velo. This success has allowed the segment to reach profitability two years earlier than initially expected.
British American Tobacco p.l.c. (NYSE:BTI) benefits a lot from the stability of the nicotine market, particularly during periods of market downturns. For example, despite the market experiencing one of its worst declines in 2022, BAT managed to deliver over a 20% return to shareholders. Though the market might be facing problems due to dropping smoking rates, the shift toward vaping has somewhat stabilized the industry, which is good news for companies dealing with these products. The use of vaping among US adults increased by nearly 40% between 2019 and 2023, as reported by YouGov. These companies also enjoy substantial profit margins and require minimal capital expenditures. Moreover, they are spared from extensive research and development costs, allowing them to distribute a significant portion of their earnings to investors.
British American Tobacco p.l.c. (NYSE:BTI) is a strong dividend payer as evident from its cash flow. The company expects to generate £40 billion ($50.57 billion) in free cash flow before dividends over the next five years. It also outperforms on metrics like dividend yield and valuation when compared to its competitor, Philip Morris International Inc. (PM). BTI boasts an impressive dividend yield of 11.48% and trades at a forward price-to-earnings ratio of only 7.23. In contrast, PM offers a dividend yield of 4.9% with a higher forward price-to-earnings ratio of 16.75. This stark comparison highlights that BTI is significantly cheaper and provides more than double the dividend yield compared to PM. British American Tobacco p.l.c. (NYSE:BTI) currently offers a quarterly dividend of $0.743 per share and has a dividend yield of 11.48%, as of July 16.
At the end of March 2024, 19 hedge funds tracked by Insider Monkey reported having stakes in British American Tobacco p.l.c. (NYSE:BTI), down from 22 in the previous quarter. These stakes are collectively valued at over $588.6 million.
