I guess what I'd really like to kick around in this thread is whether BTI is a yield trap. Its yield is unusually high right now, but it is well covered by earnings, and the payout ratio isn't all that high. MO, in contrast, has flirted with greater than 100 percent payout ratio in recent years, making me much more wary.
Yes, in the very long term, tobacco probably does not have that bright a future, but it seems like everyone is acting like the whole world is going to be forced to stop smoking next year, which just isn't going to happen.
I've been buying BTI lately, but I am close to a true "back up the truck" moment. Maybe not as a 20 year hold, but at least five or ten. This is a huge company with huge, current, and real revenues that amply cover the 8.5 percent yield. This company is not about to disappear. Yes, the share price could go lower, but how much lower could it go in the short term (ha! famous last words)?
My most nagging fear is that even a cheap stock can get hit when a market as toppy as this one swoons. But if my conviction is high, then I'd just buy more then, I suppose. If my nerves don't get the best of me.
All thoughts appreciated!
Yes, in the very long term, tobacco probably does not have that bright a future, but it seems like everyone is acting like the whole world is going to be forced to stop smoking next year, which just isn't going to happen.
I've been buying BTI lately, but I am close to a true "back up the truck" moment. Maybe not as a 20 year hold, but at least five or ten. This is a huge company with huge, current, and real revenues that amply cover the 8.5 percent yield. This company is not about to disappear. Yes, the share price could go lower, but how much lower could it go in the short term (ha! famous last words)?
My most nagging fear is that even a cheap stock can get hit when a market as toppy as this one swoons. But if my conviction is high, then I'd just buy more then, I suppose. If my nerves don't get the best of me.
All thoughts appreciated!