Among UK stocks, British American Tobacco PLC (GB:BATS) is one of the attractive income stocks on the FTSE 100 index boasting a dividend yield of 9.7%. BAT has maintained a consistent track record of stable dividends for approximately 25 years, instilling confidence in investors regarding future returns. Moreover, the 20% pullback in the share price over the last 12 months makes it a more affordable option for investors and presents an attractive upside potential, as per analysts.
BAT is a multinational corporation, specializing in the manufacture and sale of cigarettes, tobacco, and various nicotine products. The company owns a range of well-known brands like Dunhill, Camel, Newport, etc. While the smoking business is on the decline, BAT continues to assert its dominance in the industry, with encouraging growth seen in new categories (non-combustible business).
What is the Dividend Policy of BAT?
The company follows a progressive dividend-increase approach in rewarding its shareholders. In its annual results for 2023, the company declared an interim dividend of 235.5p per ordinary share of 25p for the full year. This marked a 2% increase from 2022 and represents a payout ratio of 62.7% based on 2023 adjusted diluted earnings per share.
This dividend will be paid in four equal quarterly installments of about 58.88p per share in May 2024, August 2024, November 2024, and February 2025.
Moving forward, BAT remains committed to its dividend policy and expects to deliver around £40 billion of free cash flow before dividends over the next five years. In 2023, the company’s free cash flow (before payment of dividends) grew by 3.9% to £8.4 billion compared to the previous year.
Are BATS Shares a Good Buy?
According to TipRanks consensus, BAT stock has received a Moderate Buy rating based on six Buy and four Hold recommendations. The BAT share price target is 2,885p, which indicates a 21.5% growth at the current price level.
