2 Big Tobacco Stocks to Buy Amid Recent Market Volatility: BTI, PM

Historically, big tobacco stocks tend to be relatively attractive during recessions because demand for cigarettes is unusually stable, cash flows remain strong, and they attract investors with their high dividend yields.

Amid recent market volatility stemming from geopolitical tensions in the Middle East, British American Tobacco BTI and Philip Morris International PM are two big tobacco stocks to consider.

Both companies have achieved strong growth in smoke-free products, with British American known for major cigarette brands like Dunhill and Lucky Strike, and Philip Morris recognized for iconic names such as Virginia Slims and Marlboro, the world’s best-selling cigarette brand.

Attractive Dividends

Supporting their lofty dividends is that British American and Philip Morris are carrying over $4 billion in cash on their balance sheets, respectively. Although Philip Morris has the more robust top and bottom lines, British American’s dividend stands out in particular, with a 5.62% annual yield.

That said, Phillip Morris’ yield of 3.46% also tops the S&P 500’s 1.11% average and the consumer staples sectors' 3.14% average.  

Recent Performance & Valuation Comparison

When including dividends, Philip Morris' stock is up over +100% in the last three years, with British American’s total return of 96% also edging the benchmark S&P 500 and vastly outperforming the consumer staples sectors' 12%.

Furthermore, these top big tobacco stocks still trade beneath the benchmark’s 22X forward earnings multiple. At $58 a share, British Tobacco stock trades at 11X forward earnings, with Philip Morris shares trading at $173 and 20X forward earnings.

Tracking British Tobacco & Philip Morris' Outlook 

Based on Zacks estimates, British Tobacco’s annual sales are expected to rise 7% in fiscal 2026 and are projected to increase another 3% in FY27 to $36.76 billion.

British Tobacco’s annual earnings are expected to be up 5% this year to $4.89 per share, compared to EPS of $4.64 last year. Optimistically, FY27 EPS is projected to rise another 9% to $5.32.

As for Philip Morris, its top line is expected to stretch 8% in FY26 and is projected to expand another 7% in FY27 to $47.14 billion. Even better, Philip Morris' annual earnings are currently slated to spike 12% in FY26 to $8.45 per share from EPS of $7.54 in 2025. Plus, FY27 EPS is forecasted to rise another 9% to $9.27.

Bottom Line

Periods of economic uncertainty tend to draw investors toward reliable, high-dividend stocks, positioning British American Tobacco and Philip Morris International as appealing options amid Middle East conflicts that have lifted oil prices and weighed on global economic prospects.

Notably, FY26 and FY27 EPS revisions are nicely up for these big tobacco stocks in the last 30 days, landing them a Zacks Rank #2 (Buy) at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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