When it comes to dividend shares, I’ve been in two minds about British American Tobacco (LSE: BATS) and its forecast 8% dividend yield for some time.

Governments in some developed countries are ramping up their efforts to wean people off tobacco. And a tobacco company can’t hope to do well from that.

But, I’m not convinced tobacco will meet its end anytime soon. Developing countries and their billions of people are surely the customer base for the next few decades. And where development leads to increasing wealth, the demand for premium brands should do well.

New markets

And then we have new categories of products. At the halfway point this year, British American saw adjusted total revenue down 3.7%, but with new categories revenue up 3.1%.

The new stuff only accounted for 13% of revenue. But I could see a prospect of new tobacco products taking up the whole market from traditional cigarettes eventually.

Dividend prospects

On the dividend front, the company said it remains “committed to our progressive dividend based upon 65% of long-term sustainable earnings“. And it also told us it expects “to generate c.£40 billion of free cash flow before dividends over the next five years“.

All this sounds good, right? So why won’t I buy? I’ve decided I need to stop prevaricating and impose a new hard-and-fast rule for the new year and beyond.

Whenever I see the possible demise of an industry on the horizon, even if I think it could have decades left in it, it’s bargepole time.

Still not buying

I’m shunning my next stock, Vodafone (LSE: VOD), for a different reason. It’s another I’ve been undecided about for a while. And this time the company’s done exactly what I’d been thinking it should.

The board decided to slash the 2025 dividend in half. Vodafone had been paying dividends not covered by earnings for years, while building huge debt. The dividend yield had been up in silly money at over 10%.

Shake-up

New-ish CEO Margherita Della Valle’s trying to shake things up at the slumbering giant. Back in May 2023, she famously said:

We will simplify our organisation, cutting out complexity to regain our competitiveness. We will reallocate resources to deliver the quality service our customers expect and drive further growth from the unique position of Vodafone Business.

Where’s the beef?

But a year and a half on, the market’s still not convinced. Further share price weakness has pushed the forecast dividend yield up as high as 8% again.

And with all the talk of cutting costs and improving efficiency, the board still found the cash for a €500m share buyback. Messages don’t come much more mixed than that.

Big picture

I’m still seeing a collection of worldwide mobile phone operators here, rather than a joined-up and forward-looking technology pioneer.

I do see a fair chance that Vodafone could prove me wrong and become one of the FTSE 100‘s most dependable dividend payers. But I’m sticking to another of my bargepole rules: don’t buy into a turnaround until I see the turning.