Sunday, January 27, 2019

The Profits of the Cancer Industry

This month the FTSE 100 is 35 years old. 

What has been the UK’s most successful stock market company?  British American Tobacco. Its product kills customers, but hey, they have been great for investment portfolios in our dividend-driven financialised economy.

An analysis by brokers AJ Bell reveals that if you bought £100 worth of BAT shares in 1984 and reinvested the dividends, by the beginning of 2019 they were worth £33,123.

How did big tobacco do so well? The threat of catastrophic litigation payouts in the US went away after a settlement in the mid-1990s with the US authorities. Cashflows were magnificent, as nobody new entered the market, while territories such as Russia, Brazil, Nigeria and Indonesia have proved highly profitable. In 2017 BAT made £6.5bn profits on turnover of £20.3bn, and in 2018 became one of the top-five dividend payers in the UK stock market.

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