The progressive pence dividend is covered on adjusted earnings — but 2025 cash flow took a one-off hit. British American Tobacco declared 245.04p for 2025, up 2.0% from 240.24p, paid in four quarterly installments of 61.26p, and the trailing ADR total is $3.24 for a 5.41% trailing yield. The dividend is 69.6% of adjusted diluted earnings per share of 352.1p, cover of 1.44x, in the review band, and 2025 reported free cash of 4,048 million pounds was depressed by the Canadian settlement, so the cover check grades as a caution. Adjusted leverage of 2.48x is a pass, and the pence dividend has risen or held every year in the record shown — the 2022 dip in the dollar total was sterling weakness, not a board cut. The card grades warn.
Key risk: Cigarette volumes decline every year, so the payout depends on pricing power and smokeless growth outrunning the volume decline; the 2025 reported loss included a large impairment.
Changes if: The progressive dividend policy is dropped, adjusted cover falls below 1.2x, or adjusted leverage passes 3x.
- !Dividend cover (adjusted) Adjusted cover 1.44x (69.6% of adjusted EPS), review band; 2025 reported free cash was depressed by the Canadian settlement. A caution.
- ✓Leverage Adjusted net debt/adjusted EBITDA 2.48x as reported by the company, pass (<3x).
- ✓Dividend history Declared in pence, raised or held every year; 245.04p for 2025, up 2.0%. US-dollar ADR totals vary with sterling and dipped in 2022 on FX, not on a board cut.
- ✓Trap screen TTM yield 5.41% on the ADR; payout under 100% on the adjusted base; no cut. Not a trap pattern.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.