Introduction
As the global economy continues to navigate through uncertain times, investors are on the lookout for stable and lucrative dividend-paying stocks. In our previous article, we compiled a list of the top 10 FTSE dividend stocks to buy now. In this article, we will focus on one of these companies, British American Tobacco p.l.c. (NYSE:BTI), and explore its position among other FTSE dividend stocks.
Economic Outlook for 2025
According to Goldman Sachs Research, the UK economy is expected to experience moderate growth in 2025, with GDP rising by 1.2%. This is slightly below the Bank of England’s (BoE) projection of 1.5% and the consensus among economists of 1.3%. However, inflation is likely to ease through 2025, which could lead to bigger interest rate cuts than the market expects.
The UK’s autumn budget provided a near-term boost to demand but points to a consolidation in 2025, likely slowing growth later in the year. Inflationary pressures from public sector pay deals and higher taxes on services are expected to persist in the short term but should ease as wage growth slows and labor market tightness lessens.
FTSE Dividend Performance
Despite these economic challenges, FTSE 100 dividends are expected to perform well. Analysts predict payouts to grow by 1% in 2024 to £78.6 billion, followed by a 7% bump in 2025 to £83.9 billion, though still just shy of the 2018 record of £85.2 billion. This strong performance highlights a contrast to the broader economic challenges, offering a silver lining for investors.
Share buybacks remain strong, with £49.9 billion already planned for 2024, on top of £52 billion last year. Combined with £11 billion in expected dividends from the FTSE 250 and £47.2 billion in takeovers, the FTSE 350 is set to deliver a whopping £189.7 billion in total cash returns. That works out to a cash yield of 7.7%, comfortably beating the Bank of England’s 5% base rate, the 3.92% 10-year gilt yield, and the 2.2% inflation rate.
Headwinds for UK Companies
Despite this positive outlook on dividends, domestic companies are still grappling with significant headwinds, such as rising costs like National Insurance and minimum wage, all while operating in a sluggish economy. Investors are still favoring the US market, but falling interest rates could nudge some back toward UK stocks.
Our Methodology
For this article, we used the iShares Core FTSE 100 UCITS ETF to identify prominent stocks with strong dividend-paying potential. We analyzed the performance of these companies and identified British American Tobacco p.l.c. (NYSE:BTI) as one of the top performers in our list.
British American Tobacco p.l.c. (NYSE:BTI)
Company Overview
British American Tobacco p.l.c. (NYSE:BTI) is a leading multinational tobacco company with operations in over 200 markets worldwide. The company has a diverse portfolio of brands, including Vuse, glo, and Velo, which are gaining traction globally.
Performance
Despite the challenges posed by illicit vapor products, British American Tobacco p.l.c. (NYSE:BTI) is seeing progress in its combustibles business in the US, where investments are paying off. The company’s New Category products like Vuse, glo, and Velo are doing well, with Vuse leading globally and seeing solid growth in regions like Asia Pacific, the Middle East, and Africa.
Dividend History
British American Tobacco p.l.c. (NYSE:BTI) has increased its dividend annually since 2018, making it one of the best FTSE dividend stocks on our list. On December 19, the company declared a $0.743 per share quarterly dividend, which is distributable on February 6, 2025, to shareholders on record as of December 20.
Hedge Fund Ownership
British American Tobacco p.l.c. (NYSE:BTI) was found in 24 hedge fund portfolios at the end of Q3 2024. Rajiv Jain’s GQG Partners is the biggest stakeholder of the company, with 13.70 million shares worth $501.3 million.
Conclusion
In conclusion, British American Tobacco p.l.c. (NYSE:BTI) is a strong performer in our list of top FTSE dividend stocks to buy now. While we acknowledge its potential as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns within a shorter time frame.
Recommendation
If you are looking for an AI stock that is more promising than BTI but trades at less than 5 times its earnings, check out our report on the cheapest AI stock.
