Key Takeaways
- Kraft Heinz yields 7.2% and British American Tobacco yields 6.1%.
- Kraft Heinz paid $1.60 a share in both fiscal 2020 and fiscal 2025, while British American Tobacco raised its dividend from £2.99 to £3.34 a share over those years.
- Over the twelve months to June 2026, Kraft Heinz’s dividend took 50% of its free cash flow, against 78% at British American Tobacco.
- For 2026, Kraft Heinz expects organic net sales to fall 0.5% to 2.0%, while British American Tobacco expects EPS growth towards the middle of its 5% to 8% range.
Kraft Heinz (KHC) took a $7.4 billion non-cash impairment in its second quarter of 2026. Its dividend didn’t move. It was $1.60 a share a year in fiscal 2025, the same as in fiscal 2020, and that works out to a 7.2% yield.
British American Tobacco (BTI) yields less, at 6.1%. But the company calls its payout a progressive dividend, and its dividend per share has risen every year for the last two years.
So which is the better high-yield dividend stock?
| Metric | British American Tobacco | Kraft Heinz |
|---|---|---|
| Dividend yield | 6.1% | 7.2% |
| Annual dividend | £3.34 a share (fiscal 2025); $3.29 in US dollars at today’s rate | $1.60 a share |
| Dividend growth, fiscal 2020–2025 | 2.2% a year | 0.0% a year |
| Cash dividend payout ratio (TTM) | 78% | 50% |
| Net debt/EBITDA | 2.88x | 2.71x |
| Interest coverage | 5.2x | 4.9x |
| Forward P/E | 11.2x | 11.2x |
British American Tobacco keeps raising, with less room to spare
British American Tobacco sets its dividend in pounds, so the US-dollar amount ADR holders collect moves with the exchange rate. In pounds, the dividend rose from £2.99 a share in fiscal 2020 to £3.34 in fiscal 2025, which is 2.2% a year.
Chief Executive Tadeu Marroco said on the July 30, 2026 call that the company will keep rewarding shareholders through “our progressive dividend and sustainable share buyback.”
The business gives him something to work with. Management expects EPS growth towards the middle of its 5% to 8% range for 2026, plus mid-teens growth from New Categories.
The cash behind the dividend is the soft spot. From fiscal 2021 to fiscal 2024, the dividend took 50% to 55% of free cash flow. Then free cash flow fell from £9.64 billion in fiscal 2024 to £5.79 billion in fiscal 2025, and the dividend ate up a risky 91%.
That has eased to a tighter 78% over the twelve months to June 2026. Executive Syed Iqbal said he’s “very confident” of more than 95% cash conversion for the full year.
Kraft Heinz has room to spare, and no raises
Kraft Heinz offers the reverse trade. Management says its priorities are sustaining the dividend and protecting its investment-grade credit profile. Nothing in that promises a raise.
Dividends paid ran ahead of free cash flow from fiscal 2016 to fiscal 2018. They fell from $3.18 billion in fiscal 2018 to $1.95 billion in fiscal 2019, and since then free cash flow has covered them every year but fiscal 2022.
Over the twelve months to June 2026, the dividend took a well-covered 50% of free cash flow.
The business is the worry. Net sales fell 1.4% from a year earlier to $6.3 billion in the second quarter of 2026. For 2026, Kraft Heinz expects organic net sales down 0.5% to 2.0%. It also expects adjusted operating income down 16% to 18% in constant currency, as it lifts its extra brand spending to about $700 million.
So which dividend wins?
British American Tobacco is the better high-yield dividend stock. What decides it is direction: one dividend keeps rising on a business guiding for earnings growth, and the other has stood still on sales that have shrunk over a decade.
Kraft Heinz’s revenue was $26.3 billion in fiscal 2016 and $24.9 billion in fiscal 2025.
Put $10,000 in Kraft Heinz today and it pays $720 a year, and at its five-year rate of no growth, still $720 in year 10.
The same $10,000 in British American Tobacco pays $610 now. At its 2.2% pace, figured in pounds and before any currency swings, it pays about $744 in year 10. Call that a 7.4% yield on your cash. It passes Kraft Heinz’s income in about seven and a half years, around 2034.
Kraft Heinz’s case is a fair one. It pays the bigger check today, keeps half its free cash flow after the dividend, and carries slightly less debt. It’s just that a dividend held flat at a company guiding operating income down 16% to 18% has little behind it to grow, and British American Tobacco’s has a business still growing earnings.
Of course, that edge depends on British American Tobacco’s free cash flow climbing back from fiscal 2025’s £5.79 billion. Its full-year 2026 results will show whether the cash conversion target held.
So what is British American Tobacco stock actually worth?
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