9% dividend yields! Should I buy this FTSE 100 share for my Stocks and Shares ISA?

This FTSE 100 company has slumped in value during Tuesday business. Does this represent a top dip buying opportunity? Or will it keep sinking?

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I think that now is a great time to buy FTSE 100 shares. A lot of top-quality UK stocks continue to trade pretty cheaply following the 2020 stock market crash. But I wouldn’t be tempted to buy shares in Imperial Tobacco (LSE: IMB).

In fact I sold my own holdings in the FTSE 100 tobacco titan several years back. I headed for the exits as the regulatory noose governing the sale, marketing, and the use of cigarettes tightened. And I don’t regret my decision for an instant. The company’s declining share price — and the growing attacks on vaping products by global legislators, too — has justified my decision to sell.

Imperial Tobacco’s share price has more than halved since I sold out back in 2017. Recent media reports concerning the company’s gigantic US market suggests that the Footsie firm could keep on falling too.

Imperial Tobacco shares fall again

A Wall Street Journal report suggests that President Joe Biden is considering slapping a limit on the amount of nicotine the likes of Imperial Tobacco can load their product with. Such a step would naturally damage the addictiveness of cigarettes and similar products and could deal a sledgehammer to the company’s revenues there. The report suggests, too, that lawmakers are approaching the deadline by which menthol cigarettes must be banned.

It’s no wonder that Big Tobacco shares have fallen heavily in price. Imperial Brands itself is down 8% in Tuesday business, along with its FTSE 100 cousin British American Tobacco. If smokers lose the physical craving for tobacco products, what incentive will there be for them to keep buying, especially as health warnings over the habit get noisier and people increasingly pursue healthier lifestyles?

Screen of price moves in the FTSE 100

Of course the threat of profits-crushing legislative action isn’t confined to the US. New Zealand has also announced a raft of plans to curb the usage of cigarettes, from lifting the legal smoking age and imposing new sales restrictions to also cutting nicotine levels in cigarettes. Lawmakers across the globe appear to be in a race to make the world ‘smoke free,’ a drive that threatens long-term sales of Imperial Brands’s traditional combustible products as well as its next-gen vapour technologies.

A FTSE 100 share I’d avoid

City analysts are expecting Imperial Brands’s earning to fall 2% year-on-year in the current financial year (to September 2021). They’re expecting a fractional bottom-line improvement in fiscal 2022, though. And at current prices of £14.50 per share many investors might be tempted to buy in on a hoped-for rebound. The FTSE 100 stock trades on a rock-bottom forward price-to-earnings ratio of 8 times right now. It carries a show-stopping 9% dividend yield as well.

Fans of Imperial Brands will point to the formidable strength of the firm’s brands like JPS and West. They hope that these industry-leading labels will enable the FTSE 100 company to keep thriving in a shrinking marketplace. I’m not convinced, though. And so I’d rather buy other UK shares for my ISA today.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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