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Image source: Getty Images <\/p>\n Image source: Getty Images <\/p>\n
Collecting dividends from a dividend stock is one of the most satisfying ways to build a passive income. The money arrives whether you\u2019re working, sleeping, or on holiday. And the UK stock market is packed with opportunities to make it happen.<\/p>\n
One company that regularly catches the eye of income investors is\u00a0British American Tobacco\u00a0(LSE:BATS).<\/p>\n
With a dividend per share of 245.04p, investors only need to own 97 shares to unlock a passive income of\u00a0\u00a3237.69\u00a0a year. At the current share price of 4,390p, that position would cost approximately\u00a0\u00a34,258.30\u00a0to build \u2013 comfortably within reach for many ISA investors.<\/p>\n
But is it actually a good idea?<\/p>\n
What\u2019s the investment case? <\/p>\n
British American Tobacco is one of the world\u2019s largest tobacco companies, owning iconic brands including Dunhill, Lucky Strike, and Newport.<\/p>\n
The stock currently yields around 5.7%, making it one of the more generous income opportunities in the FTSE 100. But unlike many high-yield income stocks, the payout is actually backed by substantial and highly predictable cash flows, generated from a deeply loyal customer base.<\/p>\n
That\u2019s not a coincidence. Tobacco is one of the most addictive consumer products on the planet, and that dynamic translates directly into pricing power and cash generation that most businesses can only dream of.<\/p>\n
But beyond traditional cigarettes, the group has been investing heavily in its New Categories division.<\/p>\n
This newer line of products focuses on vapes, heated tobacco products, and nicotine pouches under brands like Vuse and Velo. And the segment is growing rapidly as a central part of management\u2019s strategy to reposition the business away from traditional cigarettes.<\/p>\n
The combination of new and legacy product sales continues to generate ample, sturdy cash flows. And that\u2019s subsequently paved the way for continuous dividend hikes each year for over two decades in a row.<\/p>\n
Needless to say, that kind of track record speaks volumes about the resilience of the underlying business model, even in the most challenging environments.<\/p>\n
What could go wrong? <\/p>\n
While British American Tobacco is making good progress with its transition, the company is working against the clock.<\/p>\n
Governments worldwide are actively tightening regulations on tobacco and nicotine products at an accelerating pace. From plain packaging laws to outright bans on certain products in key markets, the regulatory headwind is real and unlikely to reverse.<\/p>\n
This has already translated into volume declines for traditional cigarettes. And if the group\u2019s New Categories division fails to fully offset this regulatory erosion, long-term cash flows and, in turn, dividends could come under pressure.<\/p>\n
The bottom line <\/p>\n
For pure income, few dividend stocks on the London Stock Exchange offer what British American Tobacco has right now.<\/p>\n
The yield is chunky, the cash flows are formidable, and the New Categories pivot is gaining real momentum.<\/p>\n
Obviously, there\u2019s the ethical dimension to consider. Many investors understandably don\u2019t like the idea of having tobacco companies in their portfolios. And that\u2019s a completely legitimate position to take.<\/p>\n
But for investors who don\u2019t have such ethical objections and are comfortable with the regulatory risks, this dividend stock could be worth investigating further.<\/p>\n
The post Just 97 shares of this UK dividend stock generate \u00a3238 in passive income<\/a> appeared first on The Twelfth Magpie<\/a>.<\/p>\n More reading<\/p>\n Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco P.l.c. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.<\/a><\/p>\n Motley Fool UK 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images Collecting dividends from a dividend stock is one of the most satisfying ways to…\n","protected":false},"author":2,"featured_media":39097,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[4],"tags":[20030,275,4450,20031,1451,5691,1828,20033,20032,5,6],"class_list":["post-39096","post","type-post","status-publish","format-standard","has-post-thumbnail","category-uk","tag-british-american-tobacco","tag-cash-flows","tag-dividends","tag-income-opportunities","tag-investors","tag-passive-income","tag-stock-market","tag-tobacco-companies","tag-traditional-cigarettes","tag-uk","tag-united-kingdom"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116590168176774379","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/39096","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=39096"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/39096\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/39097"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=39096"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=39096"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=39096"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}