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As of April 2026, the UK State Pension is getting a pleasant improve from £230.25 every week to £241.30, translating into an annual revenue stream of £12,547.60. That’s definitely a step in the best route. However sadly, it’s nonetheless not sufficient to get pleasure from a snug retirement.
Fortunately, there are many other ways to earn some additional passive revenue. And high-yield dividend shares are among the many greatest choices, in my view. In any case, by merely holding shares in a enterprise, buyers can earn common and (hopefully) dependable income. And proper now, British American Tobacco (LSE:BATS) shares proceed to supply a good-looking 5.6% yield.
That’s one of many highest yields within the FTSE 100. So may an investor double the 2026 State Pension with this enterprise? Sure. Right here’s how.
A dividend hero
Investing in a tobacco firm might not sound all that wise, on the floor. In any case, regulation and taxation surrounding cigarettes aren’t precisely pleasant. Consequently, the variety of people who smoke throughout the globe has been steadily falling.
But, regardless of this huge headwind, British American continues to ship steady revenues, stable income, and chunky money flows. How? The agency’s been offsetting decrease volumes by means of worth hikes. And subsequently, dividends have continued to circulate to shareholders.
The truth is, the corporate’s elevated shareholder payouts for 29 years in a row, rising by a long-term common of 4.6% a yr – forward of inflation. And on a trailing 12-month foundation, every share now pays out £2.4024 in dividends.
So all an investor has to do is purchase round 5,223 shares to earn a passive revenue equal to the 2026 State Pension.
Admittedly, that’s going to value round £223,700, which isn’t precisely pocket change. However by drip feeding a small quantity every month and reinvesting dividends alongside the way in which, even a modest investor can finally construct this place over time. And if British American retains climbing dividends, then buyers may need to speculate even much less.
Can dividends proceed to rise?
Pricing energy has its limits, particularly throughout a cost-of-living disaster. Monetary stress on households is probably going accelerating the decline of cigarette consumption. However administration isn’t blind to this shifting panorama.
The corporate goals to switch 50% of its income with smokeless merchandise by 2035. The plan is to drastically develop its presence inside the vaping, heated tobacco, and oral nicotine markets, in addition to unlock new efficiencies to scale back working prices.
Is it working? Up to now, it appears to be. The group now has simply over 30.5m customers of its smokeless manufacturers, which now make up 18.2% of the income stream. On the similar time, working margins have elevated to 42%, thanks partly to ongoing effectivity efforts.
It looks as if British American Tobacco shares is perhaps a no brainer for revenue buyers who aren’t fussed about investing in a tobacco enterprise.
Nonetheless, whereas the progress is encouraging, it’s vital to recognise there’s nonetheless a protracted approach to go. And with rivals executing related methods, the competitors’s solely going to get fiercer transferring ahead.
So buyers have to rigorously weigh these dangers in opposition to the potential rewards earlier than placing any cash to work. However in my view, this dividend inventory undoubtedly deserves a more in-depth look.
