We recently published a list of 8 Unstoppable Dividend Stocks to Invest in. In this article, we are going to take a look at where British American Tobacco p.l.c. (NYSE:BTI) stands against other unstoppable dividend stocks to invest in.
On December 27, the Magnificent Seven tech stocks declined by 3.1%, driven by the rising popularity of China’s DeepSeek, which uses cost-effective technology, tempering expectations for increased AI-related spending. The broader market also dropped 1.5%. While the long-term potential of DeepSeek remains uncertain, the market’s nervous response highlights the fragile state of the two-year-old bull market. Stocks, which recently reached record highs, are now trading at price-to-earnings ratios not seen since the 1990s. According to analysts, for investors seeking stability amid market volatility, dividend stocks may offer an appealing alternative to bonds, providing strong yields without some of the recent challenges facing the fixed-income market.
Dividend stocks underperformed in 2024 as the ongoing AI boom and growing enthusiasm for tech stocks drew investor attention elsewhere. The Dividend Aristocrats index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, trailed the broader market during the year. Despite this, analysts are confident about the long-term prospects of dividend stocks. Their optimism stems from the strong cash reserves held by many US companies, which provide a solid foundation for maintaining or increasing dividend payments. According to the Wells Fargo Investment Institute, large-cap US companies collectively hold over $2.4 trillion in cash, offering ample potential to initiate or boost dividends.
READ ALSO: 12 Best High Dividend Stocks Under $100
Dividend growth stocks often appeal to investors because they signal a company’s long-term commitment and financial strength. Regular dividend payments typically require profitability, reliable returns, and steady cash flow, making them a strong indicator of a company’s quality. Companies that consistently raise their dividends demonstrate their ability to maintain earnings, which often reflects greater resilience during economic or market challenges. Research shows that dividend-paying companies within the broader market have historically been more profitable than those that do not distribute dividends.
In line with this investor preference, many US companies have been increasing their payouts and establishing dividend policies. By September 30, 2024, approximately 80% of companies in the Index were paying dividends, a figure unchanged from a decade ago. Notably, the technology sector now accounts for 24% of these dividend-paying companies, up from 13% ten years prior, according to Franklin Templeton. Other sectors, such as healthcare and industrials, have also seen a rise in the number of companies offering dividends.
Since the beginning of 2025, the broader market has experienced a gain of just 2.88%. In this context, UBS has highlighted high-quality stocks that are less likely to reduce their current dividend payouts compared to peers. The firm predicts a 22.9% overall likelihood of dividend cuts across regions and sectors, with the US emerging as the most secure market, showing only a 6.2% chance of reductions. In addition, most sectors in the US demonstrate relative stability. Japan, however, stands out as the most promising region for dividend growth, with an expected growth rate of 9.9%.
Companies that prioritize increasing their dividends tend to have characteristics that position them for strong future performance. Over time, firms that regularly raise or initiate dividends have outperformed other market sectors, delivering higher annual returns with less volatility.
Our Methodology
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with 12-month gains of at least 30%, as of the close of January 27. The stocks were then arranged in ascending order of their 12-month gain. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of an array of tobacco products, emphasizing the selection and consumer choice.
British American Tobacco p.l.c. (NYSE:BTI)
12-Month Return as of January 27: 32.2%
British American Tobacco p.l.c. (NYSE:BTI) is a London-based company that deals in the manufacturing of cigarettes, tobacco, and various other nicotine products. The company’s strategy focuses on reducing dependence on traditional combustible products, targeting 50% of its revenue to come from smokeless alternatives by 2035. It dominates the vapor market with its Vuse brand, holding a 40.3% value share in key regions, and is advancing in the modern oral category with Velo. This shift positions BTI as a leader in emerging product categories, which continue to gain traction and offer a sustainable path forward as demand for traditional smoking products declines. In the past 12 months, the stock has surged by over 32%, which makes BTI one of the best unstoppable stocks.
In the first half of FY24, British American Tobacco p.l.c. (NYSE:BTI) reported a 6.8% decline in cigarette sales compared to the same period in 2023, following drops of 5.3% in 2023 and 5.1% in 2022. This downward trend significantly impacted the company’s stock, with its market value falling by over 40% at one point. However, like others in the industry, the company offset declining sales by raising prices, which boosted profits and contributed to a stock recovery. Despite the drop in sales, nicotine’s addictive nature ensures a loyal and consistent customer base.
British American Tobacco p.l.c. (NYSE:BTI) stands out as a solid choice for income-focused investors due to its strong dividend track record. Over the next five years, the company anticipates generating approximately £40 billion (roughly $50.57 billion) in free cash flow, excluding dividend payouts. In addition, it has consistently raised its dividend each year since 2018. the company currently pays a quarterly dividend of $0.7431 per share and has an attractive dividend yield of 7.56%, as of January 27.
At the end of Q3 2024, 24 hedge funds tracked by Insider Monkey held stakes in British American Tobacco p.l.c. (NYSE:BTI), up from 21 in the previous quarter. These stakes have a total value of over $1.3 billion. Among these hedge funds, GQG Partners was the company’s leading stakeholder in Q3.
Overall, BTI ranks 8th on our list of unstoppable dividend stocks to invest in. While we acknowledge the potential for BTI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BTI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
