British American Tobacco vs. Altria: Does Stronger Volume Performance Make BAT a Buy?

Core Insights - Altria and British American Tobacco offer attractive yields of 7.4% and 7.7% respectively, significantly higher than the S&P 500's 1.2% and the average consumer staples yield of 2.7% [1] - Both companies face a long-term decline in cigarette volumes, with Altria experiencing a more severe decline compared to British American Tobacco [2][4] Volume Trends - Altria's cigarette volume declined by 9.7% in 2022, 9.9% in 2023, and is projected to decline by 10.2% in 2024, indicating a worsening trend [3] - British American Tobacco's volume declined by 5.1% in 2022, 5.3% in 2023, and 5% in 2024, with the latter two figures excluding the impact of the sale of its Russian and Belarus businesses [4] Business Strategies - Both companies have responded to declining volumes by raising prices, which has allowed them to maintain and even grow dividends despite losing customers [5] - British American Tobacco's global diversification has helped mitigate the impact of volume declines, but it has acknowledged significant challenges in the U.S. market [6] Future Outlook - The tobacco industry faces a bleak future unless new growth platforms are identified to replace declining cigarette operations [7] - Both companies are exploring new business opportunities, such as vaping and pouches, to address the challenges posed by declining cigarette sales [8] Investment Considerations - For short-term income investors, British American Tobacco may be the preferred choice due to its higher yield and better volume performance [9] - Long-term investors may find both companies lacking in fundamental strength to justify investment in the tobacco sector [9]