British American Tobacco (LSE: BATS) is one of the only FTSE 100 shares that can be called a ‘dividend yield hero’.

I focus on these types of companies quite a lot. That’s because I want strong compounders for my Self-Invested Personal Pension (SIPP). Since it offers a 9%+ dividend yield, this stock seems to fit the bill.

One of the major things that British American Tobacco has going for it is a consistent dividend record.

The company has managed to grow its payments to income investors for the last 23 years in a row. That makes it one of only a handful of FTSE 100 stocks with this impressive record.

9% dividend yield for life?

The British American Tobacco share price has been hammered over the last year and a half, with markets repricing the stock down from $45 to just above $30. But as a consumer defensive business, British American Tobacco could attract more attention as the UK heads closer to a recession. Investors tend to shift out of riskier plays and into consumer defensives in uncertain economic times.

But readers will be here to focus on the 9.2% dividend yield, so let’s cover that in detail now.

In 2017, the company paid £1 per share in dividends. By 2019, that had more than doubled to £2.03 per share. This year, it expects to pay investors a total of £2.39 per share.

The company also recently restated its long-term strategy to pay investors 65% of profits as dividends.

Because so few UK stocks increase their dividend payments over more than two decades, it makes British American Tobacco quite an interesting stock to track.

FTSE 100 downsides?

We do need to mention the potential downsides to investing in 9%-yielding shares like British American Tobacco.

One thing that weighs on my mind is the pretty massive amount of net debt the company carries. At last count, in 2023, that stood at £38bn. Yes, it is lower than the £45bn pile in 2017, so debt has been coming down.

But with interest rates at historic highs, that means the interest payments on debt will be larger. Higher interest payments for large debt piles suck cash out of a business and can be a drag on profits.

There are also ethical considerations to be aware of for this stock. Personally, as a former smoker, I honestly wish I’d never started.

Rising concerns about young people getting hooked on vaping may add to jitters about whether to invest here, too. The company says it aims to sell £5bn-worth of these products by 2025.

Future promise

Let’s switch back to the company’s financial prowess for a moment.

The company forecasts that it will be able to generate £40bn of free cash flow over the next five years. To me, that looks like very good news for the dividend and the payout ratio.

It can be tricky when it comes to buying shares in a company that sells controversial products. Every investor will have to make their own judgement call. But that 9% dividend yield and 23-year history of upping payouts may be too juicy to ignore.

The post 9% yield FTSE 100 shares for my SIPP! appeared first on The Motley Fool UK.

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• How to earn £596 a year in second income from 1 FTSE stock
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Tom Rodgers has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco P.l.c. 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.

In the past few years market volatility has become a common theme. And with many stocks experiencing a decline in price, I think now’s the perfect time to shop around for some bargains. With that in mind, here are two cheap shares I’d buy today and hold for the times ahead.

Lloyds

At just 43p, Lloyds (LSE: LLOY) shares are at the top of my list. I already own the stock, but I’d consider buying some more at its current price.

Before we explore why I’m bullish on the stock, let’s start by getting my concerns out of the way. The most obvious is its performance in recent times. The last five years have seen the stock fall 30%. In the last 12 months, it’s down nearly 10%.

A mix of factors have combined to produce this dire performance, with it recently being inflationary pressures. This has had a major impact on Lloyds’ operations, including leading to higher impairment charges, as seen in its latest results. In the foreseeable future, I expect inflation-related concerns to continue weighing on the stock.

However, I’m not worried about that. And I’m more concerned about what the price will be in 10+ years’ time.

The biggest attraction for Lloyds is the passive income opportunity it presents. With a dividend yield of nearly 6%, covered three times by earnings, this offers a stable source of income that should tide me over should the share price continue to lag.

With a forecast price-to-earnings (P/E) ratio of just six, Lloyds fundamentally looks cheap. For comparison, the FTSE 100 average is more than double that.

It may have been through a tough period in the past few years, but I’m fully expecting the bank to come out the other side stronger.

British American Tobacco

I’m also keeping a keen eye on British American Tobacco (LSE: BATS).

I’ve been watching the stock in the last few months or so, and like Lloyds, despite a poor performance of late, I think there’s plenty to like about it.

Firstly, it offers one of the highest yields in the Footsie, clocking in at 8.5%. What’s more, the business has taken steps to boost its dividend in recent times, including a 6% raise last year.

It also looks cheap, with a P/E ratio just shy of seven.

The biggest risk to the company is the falling popularity of smoking. Nowadays, investors focused on ESG (environmental, social, and governance) factors won’t even touch stocks of this kind.

However, the tobacco industry is still huge. Last year, the firm sold over 600bn cigarettes.

With future-proofing in mind, it’s also moved its attention to non-cigarette income streams, including modern oral products via its brand Velo. For the first half of the year, its New Categories revenue rose by over 25%. In the next few years, the business aims to generate over £5bn of revenue from these products.

What I’d do

While both stocks have faced pressures, I think at their current prices now could be a good time to buy. If I had the cash, I’d look to pick them up and hold them for the long run.

The post 2 cheap shares I’d buy and hold for decades! appeared first on The Motley Fool UK.

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Charlie Keough has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended British American Tobacco P.l.c. and Lloyds Banking Group 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.

At this moment, I think a host of FTSE 100 stocks offer great value. The index has failed to produce exciting returns in recent times. But I’m not complaining because this means buying opportunities.

With August upon us, I’m looking to add to my portfolio.

If I had the cash, here are two stocks I’d strongly consider buying this month.

Footise stalwart

First is the FTSE 100 financial services giant Legal & General (LSE:LGEN).

There are a few reasons I like the look of the stock, with the most obvious being its 8.6% dividend yield. This places it comfortably among the index’s highest returners. But what allows it to stand out from the crowd is its dividend growth over the last decade.

More recently, the business has also put its returns to shareholders in the spotlight, highlighted by its cumulative dividend plan that finishes next year.

Elsewhere, the stock also looks undervalued, trading on a price-to-earnings (P/E) ratio of just 6. This is a big discount to the FTSE 100 average of 14 times.

Last year saw the firm grow operating profit by 12%, while its earnings per share also rose to 38p, more than enough to cover its dividend rate of 19.4p per share. With the release of its half-year results due on 15 August, I’ll be watching closely for updates.

I also like the company due to its well-known brand, solid reputation, and diversification across a host of business areas. This means that regardless of short-term headwinds, the firm is well-placed to succeed in the long run.

The volatility in the banking sector in 2023 may spill over and harm the stock’s price. And we may see a short-term fall in demand for its services given economic conditions. But with its diversification, along with the passive income opportunity, I like the look of Legal & General.

Tobacco powerhouse

Next up is British American Tobacco (LSE: BATS).

Like Legal & General, I’m attracted to the stock given its meaty yield. It currently offers investors a 9% payout, albeit boosted by its flagging performance in 2023.

Regardless, last year saw the business raise its dividend by 6%. And similar to Legal & General, its shares look cheap, with a P/E ratio of around 6.

Of course, the largest risk to the company is the dwindling popularity of smoking. It’s been touted by some that the habit will be extinct by 2050.

However, the tobacco industry is still monumental in size. And to offset the predicted fall in demand in the years ahead, the company has shifted its attention to non-cigarette income streams.

New Categories revenue spiked 25% in the first half of the year, catalysed by the rising use of brands such as Velo, which offer consumers an alternative tobacco hit.

As part of this push, the business also has ambitious plans for the future, with New Categories expected to contribute over £5bn in revenue by 2025. 

The play

As high-quality companies with low valuations and solid passive income opportunities, these stocks tick all my boxes.

I already hold shares in Legal & General. So should I have the cash, I’ll look to add British American Tobacco shares to my portfolio this month.

The post I’d buy these 2 FTSE 100 stocks in August appeared first on The Motley Fool UK.

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• How these 2 dividend shares could help an ISA investor target a £1,639 income in 2026

Charlie Keough has positions in Legal & General Group Plc. The Motley Fool UK has recommended British American Tobacco P.l.c. 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.

It’s been a poor 2023 for British American Tobacco (LSE: BATS) shares. Since the turn of the year, the stock has steadily declined. As I write, it’s down by over 20%.

However, this drop means that the shares are flirting with their 52-week low. So, does this present a chance to add the stock to my portfolio?

Unpopular industry

Firstly, let’s address the elephant in the room. The tobacco industry is falling out of fashion.

In recent years, there has been a global push for society to become ‘smoke free.’

This has been seen in nations such as China, where the government recently doubled the consumption tax on cigarettes. In the US and mainland Europe, it’s been predicted by some that smoking will be extinct by 2050.

Should this trend continue, this could impact the British American Tobacco share price going forward.

Demand still strong

Despite its growing unpopularity, it would be naïve to ignore the size of the tobacco industry. In summary, it’s huge.

Last year saw the company sell over 600bn cigarettes. And more recently, its half-year results saw revenue, profit from operations, and earnings all increase.

The business is also home to brands such as Lucky Stripe. With premium names such as this under its belt, a degree of pricing power provides it some immunity to falling demand.

Aware of current trends, it’s also placing emphasis on non-cigarette income streams.

For example, it now sells vapour products as well as modern oral products, including its brand Velo, which has risen in popularity in recent times.

For the first half of 2023, New Categories revenue jumped over 25%. By 2025, the business targets to have revenue contributions north of £5bn from this line of business.

Passive income opportunity

Another major draw to British American Tobacco is its huge dividend yield. The stock currently offers investors a yield of nearly 9%.

Despite the risks it may face in the years ahead, the company doesn’t seem to be slowing down. Last year it raised its dividend by 6%.

More so, it also continues to generate impressive free cash flows. After paying just shy of £5bn in dividends last year, it still had over £3bn of free cash flows.

Alongside its high dividend, with a price-to-earnings ratio of just nine, the stock also looks cheap for a blue-chip company. This is below the average of its FTSE 100 peers and potentially signifies there’s value to be had with the stock.

Would I buy?

Well, with its substantial dividend yield and low valuation, there’s certainly a lot to like about the stock.

Of course, there are risks given the rising scrutiny of smoking. And I’d be lying if I said this isn’t of concern.

However, at its current price, I see an opportunity.

With its diversification, I think the business is in good shape to withstand the risk of falling demand for traditional products. And its latest results clearly highlight demand is still there. If I had any cash to spare, I’d be tempted to open a position in British American Tobacco.

The post Near 52-week lows, are British American Tobacco shares a steal? appeared first on The Motley Fool UK.

More reading

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• How to earn £596 a year in second income from 1 FTSE stock
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco P.l.c. 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.

As inflation skyrockets, the State Pension is looking even more inadequate. Especially since Chancellor Rishi Sunak has suspended the annual triple lock uplift.

The triple lock increases the State Pension either by earnings, inflation or 2.5%, whichever is higher. Pensioners were on course for an 8% increase this year, as wages rocketed in the wake of the pandemic, until Sunak intervened.

I’d rather rely on UK shares

Sunak scrapped the earnings element of the triple lock, so that pensioners will get a rise of just 3.1% from April 6. With inflation set to hit 7.25% that month, according to the Bank of England, the State Pension will actually fall by £387 a year in real terms. UK shares can be risky too, but at least politicians don’t decide how much I get each year.

The State Pension is hugely important because it offers a steady, rising income in retirement. From April, it will pay up to £9,627.80 a year. I would need a portfolio of almost £200,000 to generate a similar-sized income. So it plays an important role, but it’s not enough to fund a comfortable retirement.

That’s why I’m investing in a balanced portfolio of global funds, to spread my risk and give me international exposure. I will complement this with a blend of UK shares.

I make regular monthly contributions into a personal pension and Stocks and Shares ISA, plus lump sums when I have spare cash. I particularly like to load up on UK shares in the wake of a stock market crash, when valuations are cheaper.

It’s never easy buying shares when stock markets are falling and everybody is panicking. I get round this by reminding myself that I am investing for the long term, at least 15 or 20 years. That allows plenty of time for stock markets to bounce back.

I will reinvest all the dividends from my UK shares for capital growth, while I’m still working. When I retire, I will draw them as income, to supplement my State Pension.

I’d buy these FTSE 100 stocks for passive income

There are loads of top FTSE 100 dividend stocks paying an incredible passive income to pensioners. Fund manager M&G currently yields staggering 8.60%, while insurer Phoenix Group Holdings yields 7.65%.

Admiral Group, Antofagasta, British American Tobacco and Abrdn all yield more than 6%. That’s around 10 times the return on the average savings account, even after last Thursday’s Bank of England base rate increase.

Incredibly, housebuilder Persimmon and global minor Rio Tinto yield more than 10% right now. Although I’m always wary when UK shares offer such dizzying yields, and would investigate them carefully before buying.

Naturally, UK shares can be risky. If markets crash, so will my portfolio. Some individual stock picks will inevitably underperform. Dividends can be slashed, as well as increased. There are absolutely no guarantees. But in contrast to the State Pension, that’s down to me, rather than the whims of the Chancellor of the day.

The post The State Pension will rise by less than inflation — that’s why I’m investing in UK shares appeared first on The Motley Fool UK.

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Harvey Jones doesn’t hold any of the shares mentioned in this article. The Motley Fool UK has recommended Admiral Group and British American Tobacco. 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.

The falling British American Tobacco share price

In 2020 there were rightful concerns about the firm’s ability to continue selling its tobacco-based products when consumer spending was falling rapidly. Fortunately, these fears proved to be unfounded. Why? Because British American Tobacco’s products are pretty popular with its customers. And so overall revenue in 2020 remained basically flat. But due to operational efficiency improvements, margins increased, leading to a 10.5% rise in underlying profits.

This is undoubtedly good news. And is why the management team was able to increase shareholder dividends last year. By contrast, most other businesses were either cutting. or outright cancelling, them. So why’s the BATS share price still slumping?

Last week, a report came out indicating the Biden administration is exploring the potential introduction of nicotine level restrictions in cigarettes. The motive behind this move is to further protect the health of smokers. But given that nicotine is what makes cigarettes so popular, it isn’t good news for companies like British American Tobacco.

So far, the US Food & Drug Administration (FDA), who regulates these products, hasn’t made any comments regarding the report. And it’s entirely possible these new restrictions won’t come into effect. But the uncertainty appears to be negatively impacting the BATS share price, for now.

Looking to the future

I believe tobacco-based products will always face a strict regulatory environment that’ll continue to pose a threat in the future. However, the management team has fully acknowledged this risk and has since begun to diversify its portfolio of products. The firm is already seeing a rise in popularity of alternatives to cigarettes, such as vaping devices. It’s even started investing some of its capital into the cannabis sector.

As it stands, these alternative products contribute very little to the top line. But the management team is expecting them to represent around 20% of the revenue stream by 2025.

The bottom line

Seeing a company adapt to changing consumer habits is always a good sign, in my eyes. However, its alternative products are still surrounded by tight regulation at this stage, especially its foray into the cannabis sector.

As it stands, the substance remains illegal for non-medical uses in both the UK and most States in the US. The decriminalisation of marijuana will be an essential requirement to succeed within this space. And while there are expectations of this happening, it’s currently unclear when that might be.

Having said that, based on the current performance and the BATS share price, the 7.8% dividend yield looks very attractive, as well as maintainable. And so, personally, I think this is a buying opportunity for my income portfolio, despite the risks.

The post Is the British American Tobacco (BATS) share price too cheap? appeared first on The Motley Fool UK.

More reading

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• I’m targeting £9,089 a year in dividends from £20,000 in this powerhouse FTSE income share
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• How to earn £596 a year in second income from 1 FTSE stock
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Zaven Boyrazian does not own shares in British American Tobacco. The Motley Fool UK has no position in any of the shares mentioned. 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.

Less puff, more profit

Today, British American Tobacco revealed a 2.8% rise in revenue from its combustible products, thanks to a fall in volume being offset by higher prices. Adjusted profit from operations puffed 4.8% higher and £660m in cost savings was also announced.

By far the most interesting part of today’s report for me however, was the rise in the number of people consuming the firm’s non-combustible products. This climbed 3m to 13.5m over the year. The FTSE 100 titan now believes it can increase this number to 50m by 2030. 

Looking ahead, BAT also said global tobacco industry volume was expected to shrink 3% in 2021. More encouragingly, it still expects constant currency revenue growth of between 3-5%.

All told, I’d say today’s statement was pretty positive. Notwithstanding this, I wouldn’t be queuing up to buy the shares. 

FTSE 100 value trap?

For me, BAT remains a ‘Marmite’ stock. On the one hand, you’ve a global player in an industry that’s practically immune from new entrants. It’s also been a consistent winner from an income perspective. Today’s 2.5% increase to the dividend means the firm will now return a total of 215.6p per share to holders. That gives a staggering trailing yield of 8.2%, reasonably covered by profits. Analysts are forecasting another rise to dividend next year too!

On the other hand, the BAT performance over the last few years leaves a lot to be desired. The shares are now worth roughly half what they were in the middle of 2017 and trade on a P/E of 8. That’s indicative of a value trap, in my opinion.

Other potential negatives include the possibility of new revelations regarding vaping safety (or lack of) and the sizeable amount of debt on its balance sheet. It goes without saying that prospective investors also need to be comfortable about owning a company selling addictive products.

Taking all this into account, I believe there are better options in the FTSE 100. One of these, in my opinion, is BAE Systems (LSE: BA). 

Consistent income 

From an income perspective, the FTSE 100 defence giant is equally attractive. Having now reinstated its dividend, the company is expected to return 23.5p per share for FY20. This gives a yield of 4.9% at the current share price. 

Another boost to BAE’s income credentials is that it has consistently raised its payouts over the years. This is something I particularly look for when screening dividend stocks. A good-but-not-excessive, gently increasing cash return is more desirable to one that barely moves year-on-year.

This isn’t to say BAE will suit all investors. From an ethical point of view, it can arguably be placed in the same group of ‘sin’ stocks as BAT. Moreover, the share price has hardly set the world on fire recently. 

Despite this, I’m confident the ongoing need for nations to protect themselves, particularly in areas such as cybersecurity, makes BAE a solid long-term hold.

 Full-year results are due on 25 February.

The post I’d avoid this 8.2% dividend share and buy this FTSE 100 stock instead! appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The British American Tobacco share price rallied after the Covid crash in March, but has since resumed its downwards trajectory. It’s flat after today’s solid half-year report, which showed a 3.3% increase in profit from operations to £5.37bn. This was better than analysts expected. Revenues grew 1.1% to £12.27bn.

Developed markets still deliver 75% of the company’s revenues, and were resilient during the pandemic. Management put this down to “stronger consumption trends, less negative impact of vaping on cigarettes, higher supply chain inventories and an extra selling day.”

However, cigarette volumes continue to fall, down 6.5% in the first six months of 2020, to 310.5bn. British American Tobacco hopes vaping can fill the gap, and revenues jumped 40.8% to £265m. Non-combustibles now deliver 10% of the group’s total revenues.

Meanwhile, the airline industry isn’t the only one hit by travel bans, grounding passengers also hit duty-free sales of cigarettes. 

British American Tobacco shares hold firm

Management still reckons revenues will grow between 1% and 3% this year, after previously lowering its target in June. It didn’t make any further changes to earnings guidance today, pleasing investors. This was a solid set of results, given current concerns. 

British American Tobacco shares are now trading at a bargain price, just 8.1 times forward earnings. Those earnings may have taken a slight knock during the pandemic, but nothing on the scale suffered by many FTSE 100 companies.

Smoking is still in long-term decline. That could accelerate if we all decide to get healthier in the wake of the coronavirus. More than one million Britons have given up during the pandemic, according to charity Action on Smoking and Health. It will be interesting to see if that’s replicated elsewhere.

This is a top FTSE 100 dividend stock

British American Tobacco is fighting back by further boosting market share, which rose 50 basis points by volume, and 20bps by share. It boasts major brands including Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans, Newport, and Camel.

The £60bn FTSE 100 group still shifts a huge amount of units, and remains a highly cash-generative business. It’s able to run debts of around £44bn without spooking markets. Management calculates that adjusted net debt to adjusted EBITDA will be around 3x by the end of 2021. I’d like to see that come down, but it looks manageable.

The real buzz here comes from the dividend. Management is committed to its 65% dividend payout ratio, which gives you a forecast yield of 8.1%. In today’s troubled dividend market, that’s stunning.

British American Tobacco shares may not be going anywhere right now, but its dividends will take you a long way.

The post I’d buy British American shares to earn its 8% dividend yield in a Stocks and Shares ISA today appeared first on The Motley Fool UK.

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• How to earn £596 a year in second income from 1 FTSE stock
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Crucially for income seekers, the FTSE 100 cigarette giant is standing by its dividend policy. This involves paying out around 65% of its earnings back to shareholders. Investors get a generous yield of around 7%.

Given that two thirds of FTSE 100 stocks no longer pay dividends, that makes this income more valuable than ever. British American Tobacco is now the second biggest dividend payer on the index, in cash terms, according to figures from AJ Bell.

Top FTSE 100 dividend stock

It is just one step below oil giant BP. But there’s a difference. BP’s dividend cover is wafer thin at just 0.07 times earnings, while British American Tobacco’s payout is covered 1.53 times. These days that’s pretty impressive.

The British American Tobacco share price dipped 4% following this morning’s first-half trading update. The coronavirus lockdown knocked emerging market sales, notably in Bangladesh, Vietnam and Malaysia. Meanwhile, anti-pandemic measures in South Africa, Mexico and Argentina have persisted longer than anticipated. South Africa has banned tobacco sales, and is yet to indicate when the ban will be lifted.

Next Generation Product (NGP) sales have grown at a slower rate than expected, while the international travel clampdown hit duty free sales. Management said today that the pandemic will knock around 3% off revenues. It’s cutting growth expectations and also the pace of its investments into NGPs as a result.

Nevertheless, management expects earnings to increase 1-3% this year, down from 3-5%. Compared to many, the British American Tobacco share price has held up well. Cash flow conversion is expected to top 90% of adjusted profit from operations this year. The group continues to boost market share in the US and other key regions. 

British American Tobacco share price flatlines

If British American Tobacco makes its full-year dividend, this will continue a run of increases dating back to 1998. This makes it a top source of dividend income today.

Coronavirus is not the only threat, as smoking rates collapse in the West. The trend may accelerate post-pandemic, as investors shy away from firms and products that do harm. We saw what US regulators did to to vaping and e-cigarette sales. Total industry volumes are expected to fall 7% this year. The threat is real and explains why you can buy the stock for less than 10 times earnings.

But the main attraction is its generous dividend. The British American Tobacco share price is trading at 2012 levels. No wonder it has committed to the payout, even though rival Imperial Brands Group has pulled its dividend.

Investors who are happy to invest in tobacco should consider buying British American Tobacco, which has cemented its position as a top FTSE 100 dividend stock today.

The post Looking for a 7% yield? Then I’d buy the British American Tobacco share price today appeared first on The Motley Fool UK.

More reading

• 5 steps that could turn £5 a day into a £500 a month passive income
• I’m targeting £9,089 a year in dividends from £20,000 in this powerhouse FTSE income share
• Got a spare £3 a day? Here’s the passive income you could earn from it!
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Reckitt Benckiser

Household goods giant Reckitt Benckiser Group (LSE: RB) has long been one of my favourite FTSE 100 stocks, thanks to its impressive long-term track record of share price and dividend growth. It sells basic, everyday items that billions of global consumers keep in their kitchens and bathrooms all over the world, and boasts a raft of strong brands.

Such is its popularity that the Reckitt Benckiser share price usually trades at a premium level of around 24 times earnings, while offering a relatively low yield of just over 2%. Things are different today. Global stock markets have hammered stocks across the board, but Reckitt Benckiser has got into a mess of its own making, too.

On Thursday, it reported a £1.9bn operating loss, as margins weakened due to increased investment in its brands, while management recognised a £5bn impairment charge against its recent Mead Johnson child nutrition acquisition.

This shows that no matter how steady the company is, it can always slip. The coronavirus is adding to the uncertainty, as we wait to see what impact it has on the company’s sales in China and beyond. On the plus side, you can now buy Reckitt Benckiser stock at around 20 times forward earnings, which counts as a bargain by its elevated standards. The forecast yield is 2.8%, but dividend cover is strong at 1.9 and management remains progressive, having just hiked the final payment 2.3%. I would place this high on my watchlist, as global markets tremble.

British American Tobacco

The British American Tobacco (LSE: BATS) share price has underperformed lately, dropping by a third over the last three years. The group has been hit by the continuing crackdown on smoking, particularly since the US regulatory authorities are extending this to new products such as e-cigarettes and vapes, which were supposed to open up a fresh source of revenue.

The £70bn FTSE 100 group still sells a lot of cigarettes, though. Yesterday it reported a 5.7% rise in revenue to £25.9bn, although profit from operations fell 3.2% to around £9bn. Management expects adjusted revenue growth in the 3% to 5% guidance range, despite a 4% drop in overall industry volumes.

British American Tobacco stock is primarily attractive for its dividend, as it currently yields 6.7%, covered 1.5 times by earnings. Today’s entry price of 9.9 times forward earnings is attractive, as recent share price underperformance has pushed it into bargain territory, offering a cushion against further falls in the weeks ahead.

Raising prices and cutting costs should support British American Tobacco despite the long-term decline in smoking. It may even offer some protection against coronavirus concerns, as stocks in more vulnerable sectors such as travel come crashing down. It looks tempting at today’s relative bargain price.

The post Hunting for bargain shares? I like these 2 FTSE 100 dividend stocks after recent falls appeared first on The Motley Fool UK.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.