Three Things to Love about BAT

Source from:  Tobacco World  05/28/2013

There are things to love and hate about most companies. Now I want to tell you three things to love about British American Tobacco.

I will also ask whether these positive factors make the FTSE 100's major tobacco company is a good investment today.

Long-term anticipatory

BAT has been one of the main FTSE 100 long-term performers. The company has set the rate of return to shareholders and return 21% over the past 10 years, compared with 9% for the market as a whole. The five figures are 17% and 6%, respectively.

The company, which includes Dunhill, Kent, Lucky Strike and Pall Mall among its top-selling brand, continued to flourish in the courts and regulatory scary, rewarding shareholders year after year.

Defensive

The manner in which BAT has rewarded shareholders is as impressive as the magnitude of the returns.

Firms in the so-called "defensive" sectors usually do better than the companies "cyclical" sectors in the economic downturn, because they are things that people cannot do. Tobacco is a defensive advantage of the company.

In the period from October 2007 to March 2009 – less than 18 months – FTSE 100 plunged a whopping 48%. During the same period, BAT shares fell by only 4%, without giving any reason to lose sleep shareholders.

Global

BAT is the most international tobacco company in the world. As the table below shows, the proceeds are divided fairly equally between the four regions that span the entire globe.

BAT global coverage means that it has a significant impact fast-growing emerging markets. These give the company a powerful engine to drive future shareholder returns.

A good investment?

BAT has been a huge success for long-term investors. Perhaps one day be tobacco legislation to exist, but it's hard to see what was going on for decades, if at all.

The stock currently changing hands around 3,700 pence, which represents a little more than 16 times, forecast earnings for 2013. Expected dividend yield is 4%. Despite the share price is at an all-time high, with the average earnings multiple of the market and the yield is higher.

BAT long-term record of delivering for shareholders, analysts and forecasts continued double-digit revenue growth; suggest that, while the shares are not in the bargain basement, they are not entirely unreasonable price.

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"The members may cancel it at any time, and the Council are very reluctant to provide funding for tobacco products now because we are afraid it may not be around after the election," said Bethel City Council member Mary Sattler, who supports the tax.

There were also threats to citizens' initiative to abolish taxes and lawsuits. "And there are more than a few potential candidates for city council, who say that they will work with the idea of abolition of the tax in the main part of his campaign." Sattler said.

It is still too early to say whether the tobacco tax will reduce smoking rates in Bethel. The numbers provided by Alaska Tobacco Control Alliance claim that for every 10% increase in the price of a pack of cigarettes, adult smoking rates decline by 5% – and reduce the rate of child smoking to 7%.

Whether those reductions occur in Bethel remains to be seen, but one thing is certain: the full impact of the tobacco excise tax remains clouded. Enditem