British American Tobacco (LSE: BATS) is one of my top-earning second income holdings. Its dividends have given me a useful stream of cash, and the investment has done well for me.

Usually, that combination would make me want to sit tight.

Yet I’ve started to think about selling. Not because I’ve spotted an immediate collapse in the business, or because the dividend has been cut.

I’m asking a question that doesn’t fit neatly into a spreadsheet: am I comfortable earning money from the products behind those payouts?

The income case still stacks up

British American Tobacco declared a dividend of 245.04p per share for 2025, paid in four equal instalments of 61.26p. At its 24 September closing share price of 4,243p, that works out to a yield just below 6%.

Clearly, that’s attractive for someone trying to build a second income. Sure, dividends are never guaranteed, but for years they’ve been consistent, with a yield between 6% and 8%.

What’s more, the latest results don’t offer any fundamental reason to sell. In the first half of 2026, adjusted diluted earnings per share (EPS) rose 7.9%, after adjustments including its Canadian business. Reported EPS, however, fell 28.6%.

That difference is a stark reminder that a tidy headline number never tells the whole story.

Still, it remains committed to growing dividends, with payments rising 4.5% on average for the past 15 years. That doesn’t promise the same increase next year but it’s an impressive track record.

So why give up such a lucrative income stream?

There’s a business behind the ticker

The longer I own the shares, the harder I find it to separate my profit from tobacco’s health impact. The World Health Organization (WHO) says tobacco kills more than 7m people each year, including more than 1.6m non-smokers exposed to second-hand smoke.

Those aren’t company-specific figures, but they put the industry’s products in perspective.

It’s true that buying shares on the stock market usually transfers funds to the seller, not the company. But still, owning the shares means I benefit when this business generates profits. Would I be comfortable telling someone exactly how this part of my second income is generated?

Selling won’t stop anyone smoking. It will, however, mean I’m no longer part of an equation that causes harm. That’s my personal opinion, and I certainly don’t expect every income investor to reach the same conclusion.

But beyond that, there are risks too. Cigarette sales are already under pressure from shifting tobacco regulations. Next-gen alternatives are growing – contributing £257m in the first half – but the transition isn’t certain. And those products bring their own health and regulatory questions.

What matters to me now

Let me be clear: British American Tobacco remains a compelling stock to consider for investors targeting a second income. A nearly 6% yield and regular quarterly payments are hard to dismiss. But I can’t judge this holding by its dividend alone, and replacing that income may involve accepting a lower yield or different risks elsewhere.

I haven’t decided to sell yet. For now, I’m weighing what the shares contribute to my finances against what owning them means to me.

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Mark Hartley owns shares in British American Tobacco.