British American Tobacco (NYSE: BTI) has a huge 9.7% dividend yield. Given the roughly 1.3% yield on offer from the broader market, the ultra-high yield is a clear sign of increased risk. That's not shocking, given that the company's main product is facing a secular decline. But there's more to worry about here than just cigarettes.

There's no way to sugarcoat what's going on with British American Tobacco's business. In 2018, it produced roughly 700 billion cigarettes. By 2023, it was producing just 555 billion. That's a huge 21% volume decline in about five years. It has been able to offset the revenue hit from that drop by raising prices, but something is clearly wrong with the company's core tobacco business.

To be fair, British American Tobacco is not alone. Its main rivals, Altria (NYSE: MO) and Philip Morris International (NYSE: PM), are both facing the same headwind and taking the same approach to dealing with it. However, at some point, price increases are likely to make the volume decline worse. When that happens, all three of these tobacco giants could be in for some severe pain.

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Source Fool.com