The Imperial Brands share price is flying. Would I buy this cheap FTSE 100 stock today?

The Imperial Brands share price receives another boost following an encouraging update on trading. Yet it’s still dirt cheap. Would Paul Summers buy today?

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The Imperial Brands (LSE: IMB) share price was posting a very healthy gain this morning (8 October) after publishing an update on trading to coincide with the end of its financial year.

Let’s see what’s got investors cheering from the stands.

Holding steady

Perhaps most importantly, the company said it had been trading “in line with expectations“. That’s reassuring given the pressures many consumer defensive stocks have faced over the last year or so.

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Investment in its five priority markets also seems to have helped Imperial to maintain its market share with gains in Spain, Australia and the US “broadly offsetting” falls in Germany and the UK.

However, the thing that really caught my eye was the £18bn cap declaring it expected to see net revenue growth of 20-30% for its next generation products. No wonder the market was excited.

But there’s more…

Passive income powerhouse

One big attraction for investors has long been the passive income it throws off. And that looks set to continue.

Today, management declared its annual dividend would rise by 4.5% to just over 153p per share. Imperial Brands also committed to returning around £2.8bn to shareholders in FY25 (which began on 1 October). This would comprise a £1.25bn share buyback and £1.5bn in four quarterly dividend payments.

Before this morning’s announcement, this stock was down to yield a chunky 7.5% in FY25. That’s more than double the cash return of the FTSE 100 as a whole and (I think) goes some way to compensating for the extra uncertainty that comes with holding shares in individual companies.

Not that this has been much of an issue for Imperial Brand’s holders recently.

On a roll

Taking today’s move into account, the share price has now climbed 23% in 2024 alone. The index has managed just 6%.

Out of interest, the former’s rise also eclipses that of tech titans Amazon and Apple across the pond. And this is before any dividends are factored in!

Created with Highcharts 11.4.3Imperial Brands Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

As great as this performance has been, it’s worth taking note of the bear arguments surrounding this stock.

Risky business

It’s fair to say that smoking remains an easy target for regulators and governments around the world. Indeed, UK premier Keir Starmer and co have already made it clear that they’re thinking of introducing additional restrictions on outdoor smoking. Prohibiting the sale of tobacco to people born after January 2009 is also being considered.

More generally, we’ve known for some time that global tobacco consumption’s gradually declining. In 2000, roughly a third of adults smoked. This year, the World Health Organisation estimated that this had decreased to 22% and would fall to 18% by 2030.

As things stand, the firm’s been tackling these headwinds by raising prices. But for how long can this last?

Dirt cheap stock!

Then again, Imperial’s valuation arguably takes a lot of this into account. Despite their stellar performance this year, the shares change hands on a forecast P/E ratio of seven. This makes me think there could be more upside ahead, especially if sales of next generation products continue to rise and Imperial takes market share from rivals.

I’m thinking about adding this stock to my own portfolio when some free cash becomes available.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Centamin right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Centamin made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Apple, and Imperial Brands Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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