British American Tobacco
Dividend History

Based on the British American Tobacco dividend history table below we can show you why we believe that from an income investing perspective British American Tobacco is an ideal candidate.

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• Comparing British American Tobacco with Imperial Tobacco

British American Tobacco - an example company!

Suppose you bought 1000 shares in British American Tobacco during May 1999. The group's share price fluctuated during that month between £5.41 and £5.90. Lets pick a date, say May 14th, when the closing share price was: £5.50 Excluding stockbroker commissions and any taxes, you therefore paid a total of £5,500.

Click here for a write up on holding British American Tobacco shares as from May 2005.

Let's first check the dividend yield for 1999?

You would have received a dividend of 26.2 pence per share for 1999. Now, divide your dividend of £0.262 a share by your original purchase price of £5.50 and multiply with 100 and your (prospective) dividend yield at the time amounted to almost 4.8 per cent. Not bad.

Since, according to the British American Tobacco dividend history table, the Group has been paying a dividend consistently for the last eleven years - in fact:

BAT has increased it's dividend by an average of
14.3 per cent every year!

And what's happened with your dividend pay-out?

Based on the British American Tobacco dividend history table we can calculate that by:

• 2006 the dividend payout has more than doubled from over £0.26 for 1999 to almost £0.56 for 2006

• early 2010, when the final dividend for 2009 was paid, British American Tobacco's dividend pay-out has quadrupled since 1999 to almost £1, or to be more precise to £0.995 per share

What has happened with your an annual yield based on your initial purchase price?

You bought British American Tobacco shares in May 1999, paying £5.50 a share. Almost eleven years later, you’re receiving a total dividend payment amounting to £0.995 a share. Again, divide that £0.995 a share by your original purchase price of £5.50 and multiply with 100:

Your effective yield is now 18.1 per cent!

As long as British American Tobacco is able to keep boosting its dividend, and you keep holding the shares, there is no limit to how high your effective yield can go.

And what About BAT's capital appreciation?

As per the British American Tobacco dividend history table BAT have increased their dividends each year, however it has also increased in value over time.

Remember 1999, in our example above, we were able to purchase BAT shares at £5.50?

British American Tobacco share price has been a steady riser ever since. From around £12 at the start of 2006 to approx £22.50 today (during 2010, BAT's shares where trading in £19.50 - £23.50 range).

BAT's value has Quadrupled since 1999!

Let me summarise this for you:

• if you had purchased 1000 BAT's shares over ten years ago, at a cost of £5.50 per share, your overall cost would have been £5,500 (excluding purchase costs)

• on average BAT's dividend has risen 14.3 per cent per annum, almost Quadrupling in amount from the 26.2 pence in 1999 to almost a pound per share for 2009

• whilst the share price has also Quadrupled from £5.50 at purchase to between £19.50 - £23.50 per share during 2010.

After just ten years of holding your British American Tobacco shareholding of 1000 shares:

• your shares are now worth approx £22.50 per share
• your total shareholding is now worth approx £22,500
• you have received dividends totalling £5,553 -in fact more than your purchase amount
• for 2009, you have received an annual gross dividend payment of £0.96 per share, totalling £960
• providing you with an effective dividend yield of 18.1 per cent.

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Owning shares in a company such as British American Tobacco appears to tick all the boxes for an early retirement investor.

Accelerating Annualised Dividend Growth Rate!

Before we consider the sustainability of British American Tobacco's dividend and its growth prospects, it's a good idea to first consider what's happened so far.

Over the last ten, five and three years British American Tobacco's annualised dividend growth rate has steadily accelerated which is fine going forward, but only as long as the group's:

• earnings per share annualised growth rate increases as well (which it has done in the past, in comparison to the annualised dividend growth, albeit at a lower rate)
• pay-out ratio remains at least the same (the company's stated dividend policy is to pay out at least 65 per cent of its earnings as dividends, which it has done during the last few years), or, indeed increases it even further
• dividend cover does not deteriorate too fast (which it hasn't, so far)

We believe, barring unforseen circumstances, that the dividend is unlikely to be cut anytime soon. Instead, further increases are likely.

Therefore, if British American Tobacco continues to increase the dividend payout by (a conservative?) 10% each year, your annual yield on investment of 18.1% will grow to 19.9% (£1,094) and the following year to 21.9% (£1,204), etc.

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What About BAT's Dividend Growth Rates?

I would like to refer to Todd Wenning's excellent write up regarding the sustainability of British American Tobacco's dividend and growth prospects.

As I said . . . British American Tobacco is an example company!

Click here for a write up on holding British American Tobacco shares as from May 2005.

Return to British American Tobacco for more recent information on their dividend policy.

Return to Dividend Risers for information on other companies with an amended dividend policy.

Click here for a write up on holding British American Tobacco shares as from May 2005.

Return to Rising Dividends for announcements from other companies with an amended dividend policy.

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