Shares of tobacco giant British American Tobacco (NYSE:BTI) (GB:BATS) have declined by nearly 11.3% over the past year as countries, including the U.K., look to move away from tobacco. However, several factors, including hedge fund actions, an impressive dividend yield, and its stock price hovering at multi-year lows, indicate that it could be time for investors to reconsider BTI shares.
Rising Buyer Interest
For starters, BTI has a payout ratio of nearly 58.7% and a dividend yield of 10.08%. Its long-standing track record of dividend distributions makes the stock an attractive choice for dividend investors. While around 2.23% of BTI shares are held by mutual funds, the TipRanks Hedge Fund Activity tool indicates that major players on Wall Street may be starting to show interest in BTI as well. Wexford Capital recently increased its ownership stake in BTI by acquiring additional shares through two separate Buy transactions conducted within the price range of $28 to $30 per share. Additionally, Andrew Alkon’s EntryPoint Capital is a new entrant into BTI stock.
This buying interest comes amid BTI’s efforts to enhance value for its shareholders. Recently, the company sold a partial stake in Indian consumer products major ITC for net proceeds of £1.57 billion. Subsequently, BTI announced a massive stock buyback program worth £1.60 billion. These share repurchases are expected to be executed between March 2024 and December 2025.
Changing Regulatory Landscape
However, cigarette makers are still facing multiple tax and regulatory headwinds globally. The World Health Organization (WHO) has called for urgent action to limit the use of e-cigarettes. Additionally, the U.K. has been considering raising the legal age for smoking each year, with the goal of making England smoke-free by 2030.
Furthermore, BTI ended up taking a nearly $31.5 billion impairment charge on some of its brands. BTI itself is transitioning towards a future that includes less reliance on combustible products.
Is BTI Stock a Buy, Sell, or a Hold?
In this changing landscape in the tobacco space, Bank of America Securities’ Joffre Meller, the sole analyst currently tracking BTI, has reiterated a Buy rating on the stock. The $37.37 average BTI price target points to a substantial 30.6% potential upside in the stock. Additionally, BTI’s share price is now hovering closer to lows last seen in March 2020. This could mean an attractive entry point in the stock for potential investors.
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