Many investors are mainly looking for stocks that will soar in value. It can be just as effective, though, if not more effective, to seek stock-price appreciation and income. Or just seek mainly income.
Why? Well, soaring stock prices are great, but stocks don't always soar. If you buy them at overvalued prices, they may be more likely to pull back than to advance, at least in the near term. However, healthy and growing dividend payers will tend to keep making those dividend payments regularly -- often while increasing them every year.
Here's one dividend payer to consider for your long-term portfolio: British American Tobacco (NYSE: BTI). Here are some things to know about it:
- It recently sported a fat dividend yield of 8.7%.
- Its payout ratio, the percentage of earnings it pays out in dividends, was recently around 59%, which is a solid result -- suggesting that the dividend is sustainable, with room to grow.
- Its stock appears attractively priced, with a recent forward-looking price-to-earnings (P/E) ratio of 7.3, below the five-year average of 8.1.
- It's investing in smokeless product lines.
- Its brands include Camel, Natural American Spirit, Newport, Lucky Strike, Dunhill, Grizzly, Vuse, glo, and Velo.
- Its business isn't likely to grow quickly, as fewer people in various regions are smoking these days, but it still offers a very attractive dividend.
Image source: Getty Images.
So, how many shares do you need to buy if you're looking for $1,000 in annual income? Divide that $1,000 by the annual dividend amount of $2.98 per share, and you'll get your answer: about 336 shares.
Give British American Tobacco some consideration if you're looking to generate meaningful income from your stock portfolio. While many dividend payers are likely to see both their stock price and their dividend payout increase significantly over time, this stock won't. But it's offering a dividend yield over 8.5% -- so a $10,000 investment, for example, will kick out more than $850 each year.
Should you invest $1,000 in British American Tobacco right now?
Before you buy stock in British American Tobacco, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and British American Tobacco wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $855,238!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 21, 2024
Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool recommends British American Tobacco P.l.c. and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
