British American Tobacco, Philip Morris, Imperial Brands: trading tobacco and vaping companies

(Video Transcript)

Vaping and tobacco sector clouded by regulations

Interested in vaping products and companies? Well, what's interesting about this space is that vaping products, which began as part of the anti-tobacco movement, were initially intended to be the safer choice than cigarettes.

Very swiftly that mood music changed. Regulators found that those using vapes filtered on a lot of nicotine and sometimes in bigger doses, given you can vape virtually anywhere. Vaping, regulators say, should not be deemed completely safe.

And I just want to tell you that there's also been a crackdown on vapes marketed in candy-coloured boxes. Regulators say this kind of packaging can lure children under 18 to vape. There's also talk of a ban on disposable one-use vaping products seen as an environmental disaster.

Mood music souring for NGPs

Back in October, British American Tobacco (BAT) was dealt a blow because its shares sank after the US blocked the sale of six flavours of the company's main vape brand. And this included the menthol flavour, which comprise a huge proportion of its sales. BAT makes Dunhill.

Imperial Brands also reacted to that news. Imperial, of course, is listed here in the UK. Imperial Brands is a peer rival. Their product, Blue, is what underpins their next generation products (NGPs).

But whatever you want to call them - heated tobacco, vape, tobacco-free, oral nicotine pouches - well, the mood music for NGPs is souring as well. So, with this mixed outlook, with the regulatory mood music souring, where should you go with big tobacco and NGP makers?

Well, it's important to understand that they are still cash generative and they have high dividends. And this may mean that investors will have to weigh that against the regulatory risks. Imperial has just raised its annual dividends by 4%.