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Seeking new dividend opportunities from the ranks of FTSE100 stock. Investing in companies that offer attractive yields is a great way to get a second income from the stock market.
One Footsie stock stands out to me thanks to its 7.03% dividend yield and extremely cash-generating business model.I am referring to the tobacco giant imperial brand (LSE: IMB).
This is how I aim for £500 passive income We invest in companies every year.
passive income from dividends
Shares of the Imperial brand have risen 31% over the past year. The shares are currently trading at £20.08 each.
At today’s prices, you can buy 356 shares for £7,150. That leaves him with £1.52 in reserve change. Today, an investment in Imperial Brands of this size generates passive income of £502.54 each year.It’s more than I can expect from the majority FTSE 100 shares, considering the average yield of the index is 3.59%.
The company currently maintains a progressive dividend policy, in addition to enhancing shareholder value through a £1 billion share buyback program which is expected to be completed in September. Last year the business gave him a whopping £1.32 billion dividend.
Of course, dividends are not guaranteed. However, the company’s cash position looks very strong, suggesting that large payments are sustainable.The company gave away almost £2.6 billion cash flow last year. This translates to an adjusted operating cash conversion of 83% to 102% in 2021.
What’s Next for Imperial Brands Stocks?
I believe this stock provides a good hedge against very high inflation due to the company’s strong pricing power. After all, tobacco consumers have become accustomed to price increases far greater than inflation over the years due to ever-increasing tobacco taxes.
Imperial Brands enjoys top three positions in terms of market share in the five largest markets. Combined, he accounts for over 70% of the company’s operating income. Given its importance to the business, it is encouraging that the company is growing market share in four of its top five countries.
A major challenge facing businesses is the prospect of increasingly stringent legislation to limit the public health impact of smoking. To combat this threat, many tobacco companies are increasingly concentrating on lower-risk product lines, including e-cigarettes and non-combustible cigarettes.
In this regard, I think the Imperial brand needs to go further.It lags somewhat behind the likes of its competitors british american tobacco. Competitors vuse more than steam products that Imperial Brands has controlled with comparable products blue product.Indeed, Imperial Brands is doing well with oral nicotine Zone X Range, but this is still a small market.
why i buy this stock
There are some challenges that cloud the outlook a bit, but I would buy Imperial Brands shares now if I had the cash to spare.
The company continues to make huge profits from its core combustible tobacco business and its dividend yield is unrivaled.
With strong cash flow, a large share buyback program, and a strong presence in the top five markets, the FTSE 100 stock seems like a solid investment to me today.
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