Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

British American Tobacco at 3500p: clock the dividend yield but check the balance sheet.

By Robert Sutherland Smith

22 July 2014 08:20

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It was culling through the morning paper, with a fortifying cup of strong coffee in hand, when I came across a report that R.J.Reynolds the US tobacco company was being sued for $23.6 billion - or £13.8 billion in the real currency of George Osborne’s Britannia. I took a slow long sip of the coffee and read on. It told me little definitive but did reveal yet again the extraordinary freewheeling of the US justice system in which is hard to relate to the way things are done in here. If this sum related to British American Tobacco (BATS) in the UK and not to R.J.Reynolds, the shares at today’s price would be selling on a multiple of 4.7 times that claim. Or to put it another way – a way that tells you something useful - the claim represents at today’s British American share price of 3500p, one fifth of British American’s current market equity capitalization.; or looking at it from another perspective, half the Group’s total assets.

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