Investing in tobacco stocks can be addictive. Despite decades of anti-smoking regulation, from advertising bans to plain packaging and enormous tax rises, cigarette makers keep churning out record profits and coughing up whopping dividends.
Take British American Tobacco (BAT). Last year it made a profit of £4.6bn and raised its dividend by 4%, even as the volume of cigarettes it sold fell 0.5%.
It was another solid year for investors, who expect nothing less. But now a whiff of excitement has entered the lives of BAT shareholders. A $47bn (£38.5bn) bid for the 58% of Reynolds American, a US tobacco rival, that it does not already own was disclosed two weeks ago.
BAT’s shares have fallen steadily since the takeover approach was announced. With a