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British American Tobacco (LSE: BATS) is certainly one of my top-earning second earnings holdings. Its dividends have given me a helpful stream of money, and the funding has accomplished effectively for me.
Normally, that mixture would make me need to sit tight.
But I’ve began to consider promoting. Not as a result of I’ve noticed a direct collapse within the enterprise, or as a result of the dividend has been lower.
I’m asking a query that doesn’t match neatly right into a spreadsheet: am I snug incomes cash from the merchandise behind these payouts?
The earnings case nonetheless stacks up
British American Tobacco declared a dividend of 245.04p per share for 2025, paid in 4 equal instalments of 61.26p. At its 24 September closing share worth of 4,243p, that works out to a yield just under 6%.
Clearly, that’s enticing for somebody making an attempt to construct a second earnings. Certain, dividends are by no means assured, however for years they’ve been constant, with a yield between 6% and eight%.
What’s extra, the newest outcomes don’t provide any basic cause to promote. Within the first half of 2026, adjusted diluted earnings per share (EPS) rose 7.9%, after changes together with its Canadian enterprise. Reported EPS, nevertheless, fell 28.6%.
That distinction is a stark reminder {that a} tidy headline quantity by no means tells the entire story.
Nonetheless, it stays dedicated to rising dividends, with funds rising 4.5% on common for the previous 15 years. That doesn’t promise the identical improve subsequent 12 months nevertheless it’s a powerful monitor document.
So why surrender such a profitable earnings stream?
There’s a enterprise behind the ticker
The longer I personal the shares, the tougher I discover it to separate my revenue from tobacco’s well being affect. The World Well being Group (WHO) says tobacco kills greater than 7m folks every year, together with greater than 1.6m non-smokers uncovered to second-hand smoke.
These aren’t company-specific figures, however they put the business’s merchandise in perspective.
It’s true that purchasing shares on the inventory market normally transfers funds to the vendor, not the corporate. However nonetheless, proudly owning the shares means I profit when this enterprise generates earnings. Would I be snug telling somebody precisely how this a part of my second earnings is generated?
Promoting gained’t cease anybody smoking. It can, nevertheless, imply I’m now not a part of an equation that causes hurt. That’s my private opinion, and I definitely don’t anticipate each earnings investor to achieve the identical conclusion.
However past that, there are dangers too. Cigarette gross sales are already underneath stress from shifting tobacco rules. Subsequent-gen options are rising – contributing £257m within the first half – however the transition isn’t sure. And people merchandise convey their very own well being and regulatory questions.
What issues to me now
Let me be clear: British American Tobacco stays a compelling inventory to think about for buyers concentrating on a second earnings. An almost 6% yield and common quarterly funds are laborious to dismiss. However I can’t decide this holding by its dividend alone, and changing that earnings could contain accepting a decrease yield or totally different dangers elsewhere.
I haven’t determined to promote but. For now, I’m weighing what the shares contribute to my funds towards what proudly owning them means to me.
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Mark Hartley owns shares in British American Tobacco.
