An Addictive Yield from Cigarettes 

Focus: GLOBAL

Douglas Moffitt Image Douglas Moffitt Editor-in-Chief, Successful Personal Investing

British American Tobacco boasts a spotless record of rewarding shareholders, writes Douglas Moffitt in The IRS Report.

I am still not convinced the March FTSE low will not be tested again, though I think it is increasingly likely it will not: the real test may not come until interest and inflation rates start rising again. But Sainsbury’s (LSE: SBRY) surprise equity cash raising was another wake-up call to remind us that, until the banks start lending properly again, it is likely to be shareholders—existing or newly-recruited—who will have to put up the working capital which companies need.

So, I will not be surprised if [other companies I invest in] come round to me with the begging bowl. I hope, on the basis of the big discounts at which other rights issues are being priced, that they will offer me better terms than I can get by buying in the market now. And if the utility companies—probably carrying more debt than they are now really comfortable with—see others getting away with it, even they could be tempted to follow suit.

[Since] I have no need to needlessly raise our risk profile, I have turned to another tried and tested earner, the addictive weed. The market collapse has left yields on the major tobacco companies at almost unprecedentedly generous levels, and I can no longer resist British American Tobacco (LSE: BATS; NYSE: BTI).

It recently celebrated its centenary, but has only existed in its current stock market form as a “pure” tobacco company for some ten years.