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Want $500 in Annual Dividend Income? Here’s How Much You’d Have to Invest in British American Tobacco Stock

It’s no secret among income investors that tobacco stocks are some of the best places to look for high dividend yields.

Tobacco companies have long been the source of reliable profits, and they’ve historically returned much of those profits to investors through dividends, not having to spend much on things like research and development or capital expenditures. Even today, in an era when cigarette sales continue to decline, tobacco stocks still pay generous dividends.

British American Tobacco (BTI 1.00%), the owner of popular brands Camel, Lucky Strike, and Newport, fits that mold well as the stock currently sports a dividend yield of 9.6%.

How to make $500 from British American Tobacco stock

With a dividend yield of 9.6%, you don’t have to invest too much into British American Tobacco to collect $500 a year in dividend income. In fact, you would only need to spend about $5,200 on the stock, which would give you 168 shares.

However, that calculus doesn’t take into account the potential for dividend hikes. The company has a history of annual payout raises, and it did so earlier this year with a 2% bump. At that pace, dividend hikes wouldn’t have a huge impact on your income, raising the annual payout on the above investment from $500 to $510.

Is British American Tobacco stock a buy?

If you’re a dividend investor, British American Tobacco looks like a solid stock to own. While its cigarette business is declining, the company is making up for it with new products like its Vuse e-cigarettes and Velo nicotine pouches. Its global presence also helps give it more resilience.

With its nearly 10% dividend yield, a track record of payout growth, and growing opportunities with its next-gen products, this looks like a great stock to buy for income-hungry investors.

This post appeared first on fool.com

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