Here’s how many British American Tobacco shares it takes to earn £1,000 a month in secondary income
Image source: British American Tobacco
Investors bought British American cigars (LSE:BATS) shares over the past five years have had the second best return. The company has returned more than 30% of its share price since 2021.
On top of this, the share price has increased by almost 75%. So in an uncertain and volatile market, is this a stock for investors looking for safety and stability to consider buying?
Share growth
British American Tobacco has an incredibly impressive growth record. The company has raised its dividend every year for more than a quarter of a century and shows no signs of stopping.
As the company will distribute just over £2.45 in dividends per share in 2026, investors need 4,898 shares to earn £12,000 a year – or £1,000 a month in income. At today’s prices, that’s an investment worth £222,690.
But while few are in a position to make that kind of move at once, that increased budget means the number has gone down. Five years ago, the number was 5,565. And as long as the company can keep the dividend increases coming, the number will continue to fall in the future.
Can it continue?
paid a dividend of 5.38 %. FTSE 100 average. But – as Tom Jones might say – that’s not unusual in the state of British Tobacco shares over the past five years.
In fact, 5.38% is the lowest dividend yield since 2021. And that makes it seem like a bad time to consider buying the stock, but investors need to be careful with that thought.
There is no way to go back in time and buy a stock in 2023 when it was trading at a yield of over 10%. But the fact that it was cheap then doesn’t mean it’s not a good value now.
Fixing past prices can lead investors to misjudge the opportunities in front of them. It’s easy to do, but this is something that the best investors work hard to avoid.
Where are we now?
In many ways, British American Tobacco hasn’t changed much in the past five years. Its core product is addictive and dangerous, but it is cheap to produce and very profitable.
That means there is a constant threat of regulation that investors need to consider. And the company’s main defense against this is the introduction of its new products, which include nicotine pouches. Those have proved popular, but the question is whether they can grow fast enough to offset the decline in tobacco prices. I think, however, that human trends make this impossible.
Tobacco revenue has been stable, but this has been due to price increases. And that won’t last forever, especially with the old customer base leading to an indirect drop in volume.
Opportunities to earn money
When I try to list the companies most likely to be disrupted by artificial intelligence (AI), British American Tobacco is very close to the top. And that’s why the stock is doing well.
Ultimately though, I don’t see that as enough to justify a long-term investment. Even for investors looking for a reliable second income, I think there are better stocks to consider.
