British American Tobacco p.l.c. (BTI): A Bull Case Theory

We came across a bullish thesis on British American Tobacco p.l.c. on Compounding Dividends’s Substack by TJ Terwilliger. In this article, we will summarize the bulls’ thesis on BTI. British American Tobacco p.l.c.'s share was trading at $56.62 as of January 13th. BTI’s trailing and forward P/E were 29.85 and 11.40 respectively according to Yahoo Finance.

British American Tobacco p.l.c. provides tobacco and nicotine products to consumers in the Americas, Europe, the Asia-Pacific, the Middle East, Africa, and the United States. It offers vapour, heated, and modern oral nicotine products; combustible cigarettes; and traditional oral products, such as snus and moist snuff.

The stock remains a top-performing stock in the author’s Portfolio, having delivered more than 60% total return since the initial investment. The company combines a high dividend yield, strong cash flow, and profitable growth in new product categories, making it a reliable cash generator.

BAT’s traditional combustibles business in the U.S. is stabilizing, delivering both revenue and profit growth for the first time since 2022, while new categories like Velo, the modern oral brand, are expanding rapidly with triple-digit revenue growth and full-year profitability on track. The U.S. vaping segment, Vuse, has returned to growth following enforcement against illicit products, further supporting revenue recovery.

Overall, the company’s operating cash flow conversion is expected to exceed 95%, highlighting its ability to generate substantial free cash for dividends, buybacks, and debt reduction. Management has increased the share buyback program to £1.3 billion for 2026 and remains committed to deleveraging toward the target range of 2.0–2.5x net debt to EBITDA, which would provide additional flexibility to return capital to shareholders.

BAT also reaffirmed mid-term guidance with steady revenue and profit growth, alongside continued dividend progression. With new categories accelerating, U.S. cigarette profits stabilizing, high cash conversion, and a disciplined capital return strategy, British American Tobacco offers a compelling investment that combines reliable income with growth potential, maintaining its position as a cornerstone of a dividend-focused portfolio.

Its resilient cash generation and diversified growth drivers make it well-positioned to continue delivering shareholder value while expanding future dividend capacity.

Previously, we covered a bullish thesis on British American Tobacco p.l.c. (BTI) by Brian Coughlin in April 2025, which highlighted rapid growth in nicotine pouches, Velo Plus momentum, attractive valuation, and a 7% dividend yield. The stock has appreciated approximately 35.35% since then. This played out as new product categories drove growth. Tiny Stock Ninja shares a similar perspective but emphasizes U.S. combustible stabilization, strong cash flow, and disciplined capital returns.

British American Tobacco p.l.c. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held BTI at the end of the third quarter which was 29 in the previous quarter. While we acknowledge the potential of BTI as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.