A common complaint about the UK stock market is that it lacks exciting large-scale growth stories like Space Exploration Technologies, best known as SpaceX. But while the FTSE 100 may not rival key US indices when it comes to growth stocks, it more than holds its own on the income front.

Over the long term, that potentially makes the FTSE 100 a very exciting place for investors on the hunt for possible wealth-building bargains!

Growth has pros – but also cons

The reason for that is the stage of development many companies listed in London are at compared to those listed Stateside. The US market has a lot of old, well-established companies with proven business models. When you hear the phrase ‘cash cow’, this is the sort of business I have in mind here.

Because they are mature companies operating in mature markets, there can be limited big growth opportunities, so many use their free cash flows to pay dividends.

But the US market also contains legions of growth companies like SpaceX. Like many other companies focused on rapid revenue growth – delivered in bucketloads right now — it is also lossmaking and burning through cash.

Not only does that mean there is no dividend paid, it also puts pressure on the balance sheet over time.

SpaceX has no problem raising money at the moment, but many growth companies struggle to maintain sufficient liquidity over the long run if investors lose confidence they will ever turn a profit.

Now consider the FTSE 100. While it does have some growth companies, it has boatloads of income shares too. Many of them pay chunky dividends.

Decades of annual dividend growth

Let me illustrate with an example: British American Tobacco (LSE: BATS). The maker of cigarettes such as Dunhill and Pall Mall has a stellar record of dividend growth. It is one of only a few FTSE 100 companies that have been growing their dividend per share annually for decades.

There is a simple logic to that. Cigarette use is declining and some investors shun tobacco stocks on ethical grounds. So management knows a juicy dividend yield helps create investor enthusiasm for a business with limited growth prospects. Currently it sits at 5.9%, almost double the FTSE 100 average.

Massive cash flows

What helps sustain the payouts are the huge free cash flows generated by making cigarettes cheaply and selling them at a premium price (even though the Exchequer gets far more from the shelf price of a packet of fags that the manufacturer does).

While SpaceX is lossmaking and burning cash, British American’s far more mundane business earned £3.2bn in the first six months of this year alone.

Net cash generated from operating activities was even higher at £3.4bn. The company’s debt load means financing and investment costs can eat into that. Still, this remains a business generating cash hand over fist.

Revenues inched up thanks to the company’s pricing power, despite cigarette volumes continuing to fall. I expect that decline to continue.

No dividend is ever guaranteed to last, however I believe higher prices and non-cigarette products could help British American keep generating cash and paying hefty dividends for many years to come.

I see it as a share for income-seeking investors to consider.

What income stock do we like better than British American Tobacco P.l.c. right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Christopher Ruane does not hold any positions in the companies mentioned.