British American Tobacco (NYSE:BTI) (GB:BATS), or BAT for short, is an unloved and discarded company with a 10% dividend yield. Despite operating in a changing industry, BAT’s wide moat and pricing power have remained intact, as evidenced by its growing revenues and consistently high gross margins. Combine this with a bargain valuation (6.4x free cash flow multiple), and I’m bullish on BTI.
The $34.8 Billion Impairment
At the end of 2023, British American Tobacco took a $34.8 billion non-cash impairment charge (£27.6 billion). This reduced the value of the company’s balance sheet assets and caused a large non-cash loss on the income statement. This sort of thing can happen from time to time when a company overpays for an acquisition. In this case, British American Tobacco overpaid for Reynolds American back in 2016. It’s fair to say there have been some unforeseen headwinds in the meantime.
Here are the…
