Five years ago Imperial Brands (LSE:IMB) dividend yield exceeded 9% and the share price fell below 1,500p.

Fast forward to today, FTSE100 the tobacco company’s shares are trading at 3,219 pence. So the investors who bought the shares then made some really fantastic profits.

But what about today, when the forward-looking dividend yield is currently 5.5%? Does Imperial Brands still look good? Let’s take a closer look.

Successful inventory regeneration

When cigarettes were still apparent behind store counters, Imperial’s brands were among the most recognizable on display. John Player Special, Lambert and Butler, Golden VirginiaAND Rizla (tobacco tickets) stood out. He is also the owner Winston, Davidoffand vape brand blue.

However, by the time CEO Stefan Bomhard joined in mid-2020, the company was underperforming, causing its share price to plummet by 70% in just four years.

But by cutting the dividend to a sustainable level, selling non-core assets to reduce debt, and focusing on five high-yield markets (the United States, the United Kingdom, Australia, Germany and Spain), Bomhard turned things around.

The streamlined operation increased cash flow, which provided the basis for share buybacks and dividend increases. During Bomhard’s five-year tenure, the share price increased by more than 100%.

New boss

So the fact that this widely respected CEO retired in October adds an element of uncertainty here, in my opinion. The original announcement in May was certainly a shock to the market, resulting in the share price dropping 7% that day.

On the other hand, fresh CEO Lukas Paravicini was previously CFO, so this internal appointment means continuity, not disruption.

Reassuringly, Bomhard will be available until May 2026 to offer support if needed.

Solid results

Earlier this week, the cigarette maker announced solid results for the year ended September 30. Underlying revenues rose 4.1% to £8.3 billion, while operating profit rose 4.6% to almost £4 billion. Adjusted earnings per share increased 9.1% on a constant currency basis, helped by a reduction in share count.

The price raise more than offset the decline in volumes, as has long been the case for tobacco companies. However, sales of Imperial’s next-generation products, such as vaporizers and heated tobacco, increased by 13.7%.

Beyond the vape label bluethe company has a heated tobacco device Pulse and brand of nicotine pouches Zone. Growth here is encouraging, although sales in this unprofitable unit (£368m last year) are still less than cigarette sales.

Good value?

Of course, the biggest risk here is the fact that overall cigarette volumes have been withering for years. Looking ahead, however, Imperial Brands still targets annual earnings growth of up to 5% by 2030. So it could still prove to be a solid earnings pick.

Speaking of which, the full-year dividend increased by 4.5% to 160p per share. Analysts believe it will grow by 5% both this year and next, which means the forward yield will be around 5.5%.

Meanwhile, valuation looks quite economical, with a price-to-earnings multiple of 8.6 for FY27. This year’s £1.45 billion share buyback has already begun.

Given its continuity strategy, the company’s stock is unlikely to perform this well over the next five years. However, I believe that with a combination of growing dividends, buybacks, and a reasonable starting valuation, Imperial Brands can still do well.

So for investors who don’t exclude tobacco stocks for ethical reasons, I think it’s worth considering this option for passive income.