As you have already noticed, I have been investing successfully for longer (less 😁) than many here.
Today BAT has managed to reach my EK.
Period: 2016 - 2026
Strategy: Buy & hold (buy and leave) with a focus on cash flow
The thought experiment: 10 years ago British American Tobacco (BAT)
The entry (the euphoria)
Imagine the year is 2015/2016. Low interest rates.
Everyone is looking for yield.
BAT is considered a "safe haven". People are always smoking, right?
BAT is also planning to take over Reynolds American in the USA. The share is trading at an all-time high (often over 50-60 euros at the time). You buy.
The crash (the reality)
Shortly after buying in, the long, painful descent begins.
:
Regulation The US FDA threatens to ban menthols.
ESG trend: More and more funds are throwing tobacco out of their portfolios for ethical reasons.
Mountain of debt: The takeover in the USA has weighed on the balance sheet.
The share price almost halves over the years. From 50 euros to 40, then 30, at times even below 25 euros.
The consolation (the dividend)
Here comes the decisive point for holding this share: The cash flow.
BAT has mostly kept the dividend stable or even increased it slightly during this period. While the share price was red, money was reliably flowing into the account every quarter.
Dividend yield: As the share price fell, the relative yield for new buyers rose to 8% to 9% in some cases.
Tax advantage (for German investors): The UK does not levy withholding tax on dividends. This makes the share very low-maintenance and attractive for net income compared to US or French stocks.
The bottom line after 10 years
If you had bought at the peak 10 years ago, you would still be in the red. However, thanks to the reinvested dividends (compound interest), you would probably be in the black (total return).
The lesson: BAT is not a share to get rich (growth), but a share to stay rich (income). It is a "cash cow" that is slowly dying, but still produces a lot of milk.
