Kings Of Sin: British American Tobacco plc and Imperial Brands plc Are Two Of The Best Stocks On The Stock Market

Dave Sullivan extols the virtues of long-term buy-and-hold with top stocks British American Tobacco plc (LON: BATS) and Imperial Brands plc (LON: IMB).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

You know, there’s a constant stream of news available to investors these days, and while this can be seen as a good thing, it can also cause investors to forget about the long-term and sell their investment on a poor quarterly update from the company.

Sadly, it’s also true that investors will be reluctant to buy back into the shares, even as things start to improve. Over the course of time this short-termism can seriously impact your wealth.

Five-year focus

Normally in one of my articles I would present a chart that ran from a one-month to a 12-month view. However, today the chart is the ultimate in anti-short-termism and stretches back for five years. It features, in my opinion, two of the best stocks on the FTSE 100: British American Tobacco (LSE: BATS) and Imperial Brands (LSE: IMB), formally Imperial tobacco.

Now neither one of these stocks can boast the 465% rise that shareholders in, say, Barratt Developments have witnessed. However, I wonder how many investors have actually held that stock continually for the last five years.

Having said that, these stocks would have earned investors a capital return of 59% for British American and 89% for Imperial Brands. As the chart aptly demonstrates, both of these stocks have left the FTSE 100 for dust over the last five years.

A combination of capital and income

Despite being some of the best performers, investors have also had a steady and importantly, a growing stream of dividends.

Over the last five years, British American has grown its dividend from 126.5p to 154p for the year ending 2015. That’s good for a CAGR (compound annual growth rate) of 4%.

Not to be outdone, Imperial Brands has grown the payout from 95.1p in 2011 to 141p currently – this return shows an even more impressive CAGR of over 8%!

So it’s fair to say that these shares have consistently outperformed the benchmark, both in terms of capital return and income. Indeed, on a total return basis, British American has increased by 83% and Imperial Brands by 123% – none too shabby.

Proper Marmite shares

There’s no doubt about it, these shares are certain to divide opinion across the investment community, and I would concede that these two investments wouldn’t appeal to all investors. As with Marmite, some people will love ‘em and some will most certainly not! Then again, you could make an argument against many companies listed on the stock market that would fail the ethical test should investors drill down into the business.

However in my view, in the cold light of day, there’s no escaping the fact that these investments have been two of the best stocks to own over the last five years, and I wouldn’t be surprised to see them outperform over the next five too.

Will You Grow Richer In 2016?

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dave Sullivan owns shares in Imperial Brands. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »

Investing Articles

UK REITs: a once-in-a-decade passive income opportunity?

As dividend yields hit 10-year highs, Stephen Wright thinks real estate investment trusts could be a great place to consider…

Read more »