For value and dividend stocks British American Tobacco (WKN: 916018) (BAT) there is a long-term problem. Cigarette sales have been heavy for years. After all, Western health policy is making life difficult for the tobacco industry.
This includes regular price increases, smaller offers and the first products that are banned. Recently, a competitor received a downgrade from an analyst. Basically, it said the stock had a less good future because smokers reached less for cigarettes in times of inflation.
However, the management of BAT’s dividend share has increased earnings. At a good time, there is a pinch of optimism. Let’s see what foolish investors should know about this.
Value & Dividend Stock BAT: Forecast Confirmed!
According to British American Tobacco, they are sticking to their own forecast for the current fiscal year 2022. Specifically, this means that sales should increase by 2% to 4% year-on-year in constant currency. Or, to put it bluntly, there is growth.
Adjusted for exchange rates, BAT’s management sees earnings down by 2% for the first half of the year and 5% for full financial 2022. This means that the cigarette group should face some operational difficulties. At least there are slightly declining numbers on the earnings side.
No broken legs and already priced in. But it is a good sign for a value and dividend stock that it sticks to these projections. This shows that the analysts’ forecasts are sustainable, at least from the management’s current perspective. A sign of strength in a weaker time. But there is one shortcoming: it only affects the financial year 2022.
Just calm from the table?
In the case of the value and dividend stock BAT, the concerns outlined at the outset should not be off the table. If inflation affects cigarette consumption, it can also be a long-term phenomenon. Falling numbers are also possible in the coming quarters or years of inflation.
The question, however, is what is priced and what is not. BAT shares are currently trading at £ 34.99. Based on 2021 earnings per. share of £ 2.97, the price-to-earnings ratio is only 11.8. If we include the effect for the financial year 2022, the price-to-earnings ratio may increase to a value of just over 13.
It is also not expensive for the value and the dividend stock. But the concerns are and remain real. In addition, we must not forget: health policy is still at odds with the tobacco industry. This means that changes should continue sooner or later.
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Vincent owns shares in British American Tobacco. The Motley Fool does not own any of the listed shares.