JPMorgan Names Dividend Giant Its Top Stock Pick for a Rocky Market

This article first appeared on GuruFocus.

JPMorgan (NYSE:JPM) is betting that British American Tobacco (NYSE:BTI) could offer investors an attractive defensive opportunity amid growing market volatility, reinstating coverage with an Overweight rating and a 53 price target on its London-listed shares. The bank’s bullish assessment reflects confidence in the tobacco giant’s resilient cash flows, expanding smokeless nicotine business and generous shareholder returns.

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British American Tobacco is one of the world’s largest tobacco companies, selling cigarettes under brands including Lucky Strike and Newport. It also generates revenue from newer nicotine products, including Vuse vaping devices and Velo nicotine pouches.

JPMorgan analyst Edward Hockin highlighted the industry’s defensive characteristics, with tobacco companies demonstrating relatively resilient revenue growth despite economic uncertainty.

For British American Tobacco, the investment case extends beyond traditional cigarettes.

The bank expects like-for-like revenue growth of 3% to 5% in 2027, supported by improving U.S. cigarette market conditions and easing pressures across Asia-Pacific, Middle East and African markets.

Importantly, the company’s transition toward smokeless alternatives is gaining momentum.

First-half 2026 revenue from New Categories increased 18%, while U.S. revenue from these products surged 58.1%.

Smokeless products accounted for 19.8% of total group revenue, highlighting their growing importance as global cigarette consumption declines.

Meanwhile, British American Tobacco reported adjusted operating margins of 43.7%, underscoring its substantial cash-generating capabilities.

Management expects adjusted earnings per share to grow 5% to 8% in 2026 and plans 1.3 billion in share repurchases.

The combination of recurring demand, pricing power and shareholder distributions helps explain JPMorgan’s preference for the stock during uncertain markets.

Investors Takeaway

Investors should monitor U.S. cigarette volumes, Velo nicotine pouch adoption and Vuse vaping sales as key indicators of future growth.

British American Tobacco expects mid-teens New Category revenue growth in 2026, making execution against that target particularly important.