British American Tobacco PLC
🇬🇧 BATS.LSE · London · GB0002875804
Consumer
GBX 4407.00 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
12.5
P/E (Price-to-Earnings)Shows how much investors pay for each $1 of profit. We display the TTM P/E (Trailing Twelve Months) which uses actual earnings from the last 4 quarters. This is more reliable than Forward P/E which uses analyst estimates.
Calculation: 4407.00 ÷ 353.07 = 12.5
TTM period through: 2025-12-31
Forward P/E (estimated): 11.4
Based on analyst estimates
Reference: Provider P/E (Trailing): 12.6
Yield (Fwd)
5.56%
Dividend YieldThe Forward yield (Fwd) shows the next announced annual dividend / current price — what you'd earn going forward. The Trailing yield (TTM) in the tooltip shows dividends actually paid in the last 12 months. Forward is shown as primary because it reflects the company's current commitment to shareholders.
Trailing Yield (TTM): 5.68%
Net Debt/EBITDA (TTM)
2.3x
Latest quarter: 5.0x
Net Debt / EBITDAA leverage ratio showing how many years of EBITDA (earnings before interest, taxes, depreciation, and amortization) it would take to repay net debt. EBITDA approximates operating cash generation. Lower ratios (e.g., <3x) are generally safer; higher (e.g., >5x) may indicate more financial risk.
TTM through: 2025-12-31
Latest quarter (2025-12-31): 5.0x
The quarterly value can spike when quarterly EBITDA is very low (e.g., one-time charges).
Quick guide: <2x manageable, >4x can be risky (sector-dependent).
Payout (Fwd)
69.4%
Payout RatioDividends as a percentage of earnings. The Forward payout (Fwd) uses the announced dividend divided by actual past earnings (TTM) — it tells you if the company can afford what it promised. Very high payouts can be risky, especially if profits fall.
Announced dividend / actual earnings (TTM)
Payout (TTM): 67.5%
Cash Flow Payout (TTM): 106.6%
FCF Coverage (TTM): 0.83x
ROE
15.8%
ROE (Return on Equity)A profitability measure: how much profit is generated from shareholders’ equity. Higher isn’t always better if it comes from high debt.
EV/EBITDA
8.8x
EV/EBITDAA valuation ratio that compares total business value (including debt) to EBITDA. Lower can mean cheaper, but context matters.
Summary
British American Tobacco is a massive global consumer goods company currently navigating a fundamental strategic transition away from traditional combustible products. While the 5.68% yield and P/E of 12.48 appear tempting, the structural decline of its core legacy business and strained cash flow dividend coverage make it an imperfect fit for conservative, perpetual dividend strategies. Not recommended for new positions, as the structural transition risks outweigh the attractive valuation.
Sector Context
British American Tobacco is a global consumer staples giant that manufactures and sells cigarettes, tobacco, and nicotine alternatives. While consumer staples normally provide the predictable cash flows ideal for dividend investing, the tobacco sub-sector faces a permanent structural transition away from combustibles, introducing execution risks akin to the energy transition in fossil fuels.
Temporary Opportunity Identified
Massive non-cash impairments and major legal provisions have severely depressed recent reported earnings, masking the underlying cash generation of the business during its transition.
📊 Strategy Analysis
- • Valuation remains objectively attractive with a P/E of 12.48, placing it well within the target 8-15x sweet spot for value investors.
- • The balance sheet is relatively stable, with Net Debt/EBITDA at an acceptable 2.27x, demonstrating effective deleveraging compared to historical levels.
- • Progress in the strategic transition is evident as 'New Categories' (smokeless products) achieved profitability and continue to show strong growth.
⚠ What to Watch
- • Free cash flow currently fails to cover the dividend, with FCF coverage at just 0.83x and a Cash Flow Payout Ratio of 106.62%, raising near-term sustainability concerns.
- • The massive £27.3 billion impairment charge on U.S. brands reflects a permanent, structural decline in traditional combustible volumes, not a temporary cyclical issue.
- • Ongoing regulatory and litigation headwinds remain severe, highlighted by the recent £6.2 billion provision for a proposed Canadian settlement.
📊 Historical Trends (10 Years)
Powered by EODHDThese charts show how key metrics have evolved over the past decade, helping you identify if the company is improving or deteriorating.
Debt Evolution (Net Debt / EBITDA)
Lower values are better. A declining trend indicates the company is reducing its debt (deleveraging).
Revenue & Earnings Growth
Consistent growth in revenueRevenue
The money a company brings in from selling its products or services. It’s the top line before costs. (blue) and earningsEarnings (Profit)
What’s left after expenses. Positive earnings mean the business made a profit; negative means a loss. (green) indicates a healthy business. Look for upward trends and recoveries after temporary dips.
Dividend Sustainability (FCF vs Dividends Paid)
Free cash flowFree Cash Flow
Cash left after the company pays for running the business and maintaining it. Often used to fund dividends, pay debt, or buy back shares. (FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., blue) should cover dividends paidDividends Paid
Cash the company paid out to shareholders. It’s not guaranteed and can change over time. (green). If dividends consistently exceed FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., the dividend may be at risk.
Analysis date: 2026-04-04
Disclaimer: This information is for educational purposes only. Not financial advice.