British American Tobacco hikes dividend after profits rise 10%

British American Tobacco becomes latest firm to hike its dividend after posting a 10% rise in annual profits

British American Tobacco (BAT) is the latest firm to hike its dividend after a 10 per cent rise in annual profits.

The owner of Dunhill and Lucky Strike said its payout would rise 2.5 per cent to 215.6p per share, worth £4.9billion overall. 

It comes after other top dividend payers, including rival Imperial Brands, halted payouts to conserve cash.

Dividend hike: British American Tobacco said its payout would rise 2.5 per cent to 215.6p per share, worth £4.9bn overall

BAT said overall revenues dipped 0.4 per cent to £25.8billion in 2020, while profits rose 9.6 per cent to £8.7billion.

Tobacco firms’ cigarette sales at airports and other travel hubs have been hit hard by lockdowns.

BAT shares fell 4 per cent, or 108.5p, to 2640p after its announcement, and are down 20 per cent in the past year. 

David Kimberly, an analyst at Freetrade, said: ‘Investors looking at BAT have probably felt a lot like an ex-smoker staring at an open pack of Camel Blues. 

‘You know they’re probably not going to be good for you in the long-run but the hit that high-yield dividend gives can be hard to resist.’

A 4.6pc drop in cigarette revenues was cushioned by a near-15 per cent jump in sales of ‘new categories’ including e-cigarettes, tobacco heating products and oral nicotine pouches.

BAT is confident 50m customers will be using these products by 2030, after adding 3m last year, and as cigarette sales fall globally. 

The pandemic has highlighted the health impacts of smoking, with the World Health Organisation saying it makes it harder for the body to fight coronavirus.