Edison: British American Tobacco is Building Momentum, Dividend Yield Remains Attractive

In a recent note to clients, Edison analyst Russell Pointon said British American Tobacco’s (BAT) first-half 2025 results were “slightly ahead of expectations” and demonstrated delivery on its aim to achieve “higher rates of sustainable growth” after two years of below-par performance.

The company is “building momentum,” according to the research firm.

The analyst highlighted that U.S. returned to revenue and profit growth, aided by a stronger combustibles portfolio, better execution, and “excellent growth in Modern Oral following the Velo Plus launch late last year.”

Edison noted that Modern Oral was the “standout performer” in the first half, with Velo now “the fastest-growing brand in the fastest-growing New Categories segment globally.”

BAT is calling 2025 a “deployment year,” with new products launched across all New Categories, including Vuse Ultra in vapour, glo Hilo in heated products, and Velo Plus in Modern Oral. 

Edison said management expects these innovations to “drive growth in H2 and beyond.”

On a constant currency basis, revenue rose 1.8%, adjusted profit from operations excluding Canada increased 1.9%, and adjusted diluted EPS grew 1.7%. New Categories accounted for 18.2% of group revenue, up from 17.5% in 2024, with category contribution up 39% and return on investment improving 5.7 percentage points to 21.6%. Combustibles revenue rose 0.8% despite small share losses.

BAT has raised its constant currency revenue growth guidance for 2025 for the second time this year, now targeting the top end of the 1–2% range. Other guidance remains unchanged, with adjusted profit from operations expected to grow 1.5–2.5%.

Edison noted BAT’s share price has outperformed peers this year, with its FY25 P/E multiple now in line with the sector average, excluding Philip Morris International. 

However, it “continues to offer a more attractive dividend yield” than the peer average of 4.7%.