British American Tobacco Stock in December 2025: ITC Hotels Sale, Buybacks and Dividend Outlook for BTI & BATS Investors

British American Tobacco p.l.c. (LSE: BATS, NYSE: BTI) is closing out 2025 in a very different position from where it started the year. After a sharp re‑rating driven by litigation clarity, firmer guidance and easing U.S. regulatory fears, the stock now sits near its 52‑week highs, with investors digesting fresh news on asset sales, buybacks and dividends as of 8 December 2025. ^[1]

The key question now is less “Is BAT broken?” and more “How much is left in the tank?” This article brings together the latest news, forecasts and analyses available up to 8 December 2025 to frame that debate for BTI and BATS shareholders.

Where the Share Price Stands Now

As of the close on Friday 5 December 2025, British American Tobacco’s London‑listed shares finished around £42.83, roughly 3% below their 52‑week high of about £44.27 and up more than 40% over the past year. ^[2]

On the New York Stock Exchange, the BTI ADR trades around $57, close to the top of its 52‑week range of roughly $34.8–$59.3, according to recent analyst summaries. ^[3]

Key valuation markers:

Dividend yield: Around 5–5.5% based on recent quarterly dividends and current prices, down from double‑digit yields seen when sentiment was depressed in early 2025. ^[4]
Trailing P/E: Around 30x earnings, inflated by the large non‑cash Canadian litigation charge booked earlier in the year. ^[5]
Forward P/E: Around 11–13x on various estimates, reflecting expectations of normalized post‑settlement earnings. ^[6]

After a year in which the global tobacco sector rebuilt some of its lost credibility, BAT’s valuation now looks closer to a “normal” consumer‑staples stock than a distressed special situation.

Fresh News: ITC Hotels Stake Sale and Balance Sheet Reset

9% of ITC Hotels sold, stake cut to 6.3%

The biggest headline in early December 2025 is BAT’s sale of a 9% stake in India’s ITC Hotels:

BAT previously owned 15.3% of ITC Hotels, which was spun out of ITC Ltd in January. ^[7]
Through an accelerated bookbuild completed on 5 December, BAT sold 187.5 million shares for roughly ₹38 billion (about $420–425 million), cutting its stake to 6.3%. ^[8]
The company previously sold a $1.5 billion stake in ITC Ltd itself earlier in 2025, signalling a broader exit from non‑core Indian holdings. ^[9]

Management has been explicit: a direct stake in ITC Hotels is not viewed as strategic, and proceeds will be used to reduce debt and move toward a leverage target of 2.0–2.5x adjusted net debt/EBITDA by the end of 2026. ^[10]

For investors, the ITC Hotels transaction reinforces three themes:

Portfolio focus: BAT is concentrating capital on tobacco and nicotine rather than peripheral consumer assets.
Deleveraging priority: Asset sales complement organic cash generation and support management’s commitment to bring leverage down after the Canadian settlement.
Emerging‑market exposure remains: BAT still has meaningful exposure to India through ITC and other operations, but with more flexibility and less complexity.

Share Buybacks: 2025 Programme Nears the Finish Line

The ITC Hotels sale lands just as BAT is wrapping up a major share buyback programme:

Trading disclosures and secondary reporting indicate BAT has completed its 2025 buyback, cutting total shares in issue to about 2.18 billion, with roughly 133 million shares held in treasury. ^[11]
Earlier guidance suggested a 2025 repurchase target of about £1.1 billion, raised after stronger revenue trends and the ITC stake sale. ^[12]

Buybacks are doing three things for equity holders:

Boosting per‑share metrics (EPS, DPS cover) as the share count falls.
Supporting the share price during a period of re‑rating, contributing to the 40%+ 12‑month total return. ^[13]
Signalling confidence that management sees value in the stock, even after the rally.

At the same time, some analysts argue that buybacks plus a high dividend may now leave less headroom for aggressive debt paydown, so the balance between shareholder returns and deleveraging will be a key talking point in 2026.

Canada: Litigation Overhang Largely Resolved, Cash Drain Ongoing

One of the main reasons BAT was “cheap” heading into 2025 was uncertainty around huge Canadian class‑action cases. That overhang has largely been resolved this year:

In February 2025, BAT booked a near $8 billion (about £6.2 billion) charge tied to a proposed settlement of Canadian smoking‑related lawsuits. ^[14]
Under the plan, Ontario‑based subsidiary ITCAN will make an upfront payment followed by annual payments linked to 85% of net income, declining over time. ^[15]
In March 2025, a Canadian court sanctioned the Plan of Compromise and Arrangement, which resolves all Canadian tobacco litigation and provides a comprehensive release to BAT and related entities. ^[16]

This is structurally good news — it removes a tail‑risk that might have justified a permanent “litigation discount” to BAT’s valuation. But it is not free money:

The Canadian business is now effectively ring‑fenced as a settlement engine, with much of its future profits earmarked for claimants.
The very high trailing P/E multiple is partly an artefact of the one‑off charge taken to reflect this arrangement. ^[17]

For shareholders, the takeaway is that a big legal cloud has lifted, but a steady cash outflow to fund the settlement will be a drag on headline earnings and free cash flow for years.

Regulation: Menthol Relief, Vape Squeeze

U.S. menthol ban withdrawn

Regulation remains the defining long‑term risk for all tobacco majors. In 2025, however, the immediate news has been unexpectedly favourable to BAT on one crucial front:

In January 2025, the U.S. administration formally withdrew the FDA’s proposed nationwide menthol cigarette ban, which had been stuck in limbo for months. ^[18]
Menthol cigarettes represent a meaningful share of BAT’s U.S. profit pool, so the decision removed a major near‑term earnings threat and contributed to share price gains for BAT and peers. ^[19]

The ban could, in theory, return under a different political configuration, so the risk isn’t gone — but the timeline has been pushed further out, and that matters for valuation.

Crackdown on vapes and disposables

The more negative regulatory news for BAT has been in vaping and new categories:

In October 2025, BAT paused a planned pilot launch of an unlicensed disposable Vuse device in the U.S. as the FDA accelerated enforcement against unapproved vapes. ^[20]
Globally, regulators have sharpened scrutiny of flavoured disposables and youth access, and the 2025 Tobacco Industry Interference Index highlights coordinated industry efforts — including by BAT — to slow or shape such rules. ^[21]
BAT has responded with public campaigns such as “Vapers Deserve Better”, arguing for stricter action against illicit products and setting out its own quality and youth‑prevention standards. ^[22]

For the investment case, the nuance is this:

The combustible business is politically unpopular but highly regulated and relatively predictable.
The new‑category business has growth potential, but the rules are still being written, and BAT must walk a tightrope between innovation, youth‑protection optics and enforcement risk.

Earnings, Guidance and the 2025 Outlook

BAT’s formal guidance for 2025 has been cautiously positive:

The company expects global tobacco industry volumes to decline about 2% in 2025. ^[23]
Group revenue growth is guided towards the top end of 1–2% at constant currency, with New Categories (vapes, heated tobacco, nicotine pouches) expected to grow mid‑single digit for the full year. ^[24]
Adjusted profit from operations is targeted to grow 1.5–2.5% at constant currency, despite a 1–1.5% transactional FX headwind and about 4% translational FX drag. ^[25]

A trading update in June 2025 nudged expectations slightly higher, citing:

Improving U.S. demand, with the U.S. returning to growth after a weak patch.
New categories showing low‑single‑digit growth in H1 but expected to accelerate to mid‑single digit for the year. ^[26]

The next near‑term catalyst is BAT’s 2025 Full Year Pre‑Close Trading Update, scheduled for 9 December 2025 at 7 a.m. GMT, followed by a management conference call. ^[27]

Investors will be looking for:

Confirmation that full‑year revenue and earnings land at or above the top end of guidance.
Fresh detail on the deleveraging trajectory after the ITC Hotels sale.
Evidence that the smokeless pivot is gaining momentum despite vaping regulatory noise.

Dividend Power and Cash Returns

BAT’s investment appeal still leans heavily on income:

The latest declared quarterly dividend is £0.60 per share, with an October 2, 2025 ex‑date and November 7 payment, implying annualised dividends of £2.40 per share. ^[28]
At recent prices, that equates to a dividend yield of roughly 5–5.5%, depending on which data provider and listing (BATS, BTI, BTAFF) you use. ^[29]
Different services list the next ex‑dividend date in late December 2025 (around 29–30 December), so investors should check their broker or BAT’s website for the precise date. ^[30]

Several independent analysts and research houses still classify BAT as a “dividend powerhouse” — a high‑yield stock with a track record of stable or gently rising payouts, albeit now at a more modest yield than during the 2023–2024 slump. ^[31]

The combination of dividends plus buybacks means total shareholder yield in 2025 has easily reached high single digits, even after the rerating in the share price.

How Analysts and Models View BTI/BATS in December 2025

Broker ratings: “Moderate Buy” with a wide spread of targets

According to a 6 December 2025 MarketBeat summary:

BAT’s U.S. ADR BTI carries a “Moderate Buy” consensus from 10 brokerages.
The breakdown is 7 Buy, 1 Hold, 2 Sell.
The average 12‑month price target is about $51, notably below the current price around $57, reflecting that some analysts think the stock has overshot fair value after its rally. ^[32]

Within that, there is a wide dispersion of views:

Some banks (e.g., Citi, Deutsche Bank) have reaffirmed Buy ratings.
Others (e.g., RBC, Morgan Stanley) have moved to Underperform/Underweight with targets as low as $40. ^[33]

This spread tells you the easy consensus trade is over; BAT is now controversially “normal‑ish”, not obviously cheap or expensive.

Fair‑value estimates: from “about right” to meaningfully undervalued

Recent valuation work from several platforms points in different directions:

Simply Wall St notes that at a recent close of £43.57, the most‑watched narrative puts BAT’s fair value at £42.67, implying the shares are very close to “about right”, while their DCF model suggests a fair value more like £60.90, implying substantial upside. ^[34]
A Yahoo/Simply Wall St valuation piece similarly suggests a “central” fair value around £43.6, roughly 10% above one recent closing price, again pointing to only modest mispricing. ^[35]
Morningstar earlier in 2025 raised its fair‑value estimate for BAT to GBX 4,150 (about £41.50) / $55 per share and, in a later European dividend review, highlighted BAT as trading at roughly 0.9x its fair value with a medium uncertainty rating. ^[36]

At the same time, more cautious pieces argue that:

BAT’s current P/E of roughly 28–31x looks rich versus a tobacco industry average around 14–15x, even though the forward P/E in the low teens is less stretched. ^[37]
After a ~60% recovery from its lows in some markets, the stock may no longer offer compelling upside for growth‑oriented investors, especially in light of ESG headwinds and declining cigarette volumes. ^[38]

Sector context: tobacco as a “deep‑value defensive”

A widely cited Proactive/ Panmure Liberum analysis from May 2025 frames tobacco — and BAT in particular — as a “deep‑value, defensive, high‑income” play:

BAT and Imperial Brands were up over 40% year‑on‑year at that point, yet the broker still saw double‑digit total return potential from yield plus further re‑rating.
BAT was described as trading on a forward P/E of about 6.2 back then, with a yield over 10%, after massive impairments taken to reflect U.S. regulatory setbacks. ^[39]

Since then, the market has indeed rerated BAT closer to low‑teens forward multiples and mid‑single‑digit yields. The “deep‑value” label no longer fits quite as well, but the defensive, cash‑rich and high‑income descriptors still do.

Key Risks Investors Should Watch

Even with the improving narrative, BAT carries significant risks that are repeatedly flagged across recent analyses:

Regulatory and political risk
- Future U.S. administrations could revisit menthol bans or nicotine cap proposals. ^[40]
- The UK and other markets continue to explore “smoke‑free generation” laws that would phase out sales to younger cohorts entirely. ^[41]
Declining cigarette volumes
Global cigarette consumption is structurally falling at about 2% a year, and while BAT has pricing power, there is a limit to how far price can offset volume decline. ^[42]
Execution risk in new categories
Vapes, heated tobacco and nicotine pouches must carry more of the growth load, but regulatory noise, illicit competition and shifting consumer tastes make forecasts inherently uncertain. ^[43]
Ongoing litigation and settlement cash flows
Canada may be largely resolved, but other jurisdictions can still generate lawsuits or new settlement demands, while Canadian payments continue to drain a chunk of future profits. ^[44]
ESG exclusions and investor base shrinkage
Many institutional investors remain barred from owning tobacco, which can suppress valuation multiples regardless of fundamentals. ^[45]

Is British American Tobacco Stock a Buy, Hold or Sell in December 2025?

Different analysts now land in different places:

Some see BAT as fairly valued with a solid 5%+ dividend and modest EPS growth — attractive to income‑focused investors but less compelling for those seeking high capital gains. ^[46]
Others argue that after a big re‑rating, with trailing valuations above sector averages and litigation/menthol tailwinds already priced in, the risk‑reward is no longer skewed in investors’ favour, leading to “trim” or “exit” calls. ^[47]
A third camp believes the market still underestimates the cash‑flow durability and smokeless upside, pointing to DCF models and some broker targets that sit well above current prices. ^[48]

For now, what seems reasonably clear is that:

BAT has moved from “distressed” to “normal high‑yield defensive” in the eyes of many investors. TechStock²+1
The headline risk from Canada and U.S. menthol has diminished, while vaping/new‑category regulation and the pace of deleveraging are the next big known unknowns. ^[49]