Investors love dividend stocks, especially high-yield varieties, because they offer a significant income stream and have substantial total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. Let’s take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 over the next year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend.
A long-overdue sell-off is likely to come next year. While it does not necessarily signal a market crash, it could signal a fast-and-furious 10%, 15%, or even 20% drop into bear-market territory, as we saw earlier this year. We have been looking for ideas that could stand up best in a swift sell-off, and the group commonly known as the “sin stocks” may be just the ticket for worried investors.
One category on Wall Street that some portfolio managers don’t want to discuss in their portfolios is the so-called sin stocks. These are companies that sell tobacco and alcohol products, run gambling casinos, sex-related industries, weapons manufacturers, and now even marijuana producers. While they don’t all seem sinful at the margin, some money management companies, like some investors, refuse to own them.
We screened our 24/7 Wall St. sin-stock research database and found five companies that pay dependable, high-yield dividends and look like great ideas for growth, even as income investors worried that we could be on the verge of a big sell-off. All are rated Buy at top Wall Street firms.
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Dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.
Altria Group Inc. (NYSE: MO) is one of the world’s largest producers and marketers of cigarettes and other tobacco-related products. This stock offers value investors a compelling entry point and a generous 6.40% dividend yield. Altria manufactures and sells smokable and oral tobacco products in the United States.
The company’s dividend payout is based on free cash flow, ranging from about 64% to 80% per quarter. In recent quarters, free cash flow has exceeded dividend payments, providing a solid buffer. Altria generates strong cash flow from its core tobacco business, which provides a stable base, albeit with regulatory risk, and yields are among the highest in the S&P 500, at least for now.
The company primarily sells cigarettes under the Marlboro brand, as well as:
Cigars and pipe tobacco, principally under the Black & Mild and Middleton brands
Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands
on! Oral nicotine pouches
e-vapor products under the NJOY ACE brand
It sells its tobacco products primarily to wholesalers, including distributors and large retail organizations, such as chain stores.
Altria used to own over 10% of Anheuser-Busch InBev S.A. (NYSE: BUD), the world’s largest brewer. Last year, the company sold 35 million of its 197 million shares through a global secondary offering. That represents 18% of its holdings but still leaves 8% of the outstanding shares in its back pocket. Altria also announced a $2.4 billion stock repurchase plan partially funded by the sale.
Goldman Sachs has a Buy rating with a $72 target price.
This American aerospace and defense manufacturer has worldwide interests. It is one of the top aerospace and defense stocks to buy. It is close to a big breakout and pays a dependable 2.71% dividend. Lockheed Martin Corp. (NYSE: LMT) researches, designs, develops, manufactures, integrates, operates, and sustains advanced technology systems, products, and services.
The company operates in five principal business segments:
Aeronautics
Missiles and Fire Control
Mission Systems and Training
Space Systems
Information Systems and Global Solutions
It also provides a wide range of defense electronics products and IT services.
As the Pentagon’s prime contractor, Lockheed Martin plays a crucial role in national defense, offering a diverse portfolio of global aerospace, defense, security, and advanced technologies. Its leveraged presence in the Army, Air Force, Navy, and IT programs ensures a steady flow of follow-on orders from the U.S. government and many foreign allies.
Morgan Stanley has an Overweight rating with a $630 price target.
This British multinational alcoholic beverage company is headquartered in London. Diageo PLC (NYSE: DEO) is one of the world’s largest producers of alcoholic beverages, and it pays a solid dividend of 4.40%. The company produces, markets, and sells alcoholic beverages worldwide, including:
Scotch whiskey, gin, vodka, rum, beer, and spirits
Irish cream liqueurs,
Wine, Raki, tequila, Canadian, and American whiskey
Cachaça, and brandy, as well as adult beverages and ready-to-drink products
The company’s premium brands comprise Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray, and Guinness. Its reserve brands include:
Johnnie Walker Blue Label
Johnnie Walker Green Label
Johnnie Walker Gold Label 18-year-old
Johnnie Walker Gold Label Reserve
Johnnie Walker Platinum Label 18-year-old
John Walker & Sons Collection
Johnnie Walker The Gold Route
Johnnie Walker The Royal Route
Johnnie Walker super premium brands include The Singleton, Cardhu, Talisker, Lagavulin, and other malt brands.
Bank of America has a Buy rating with a $109 target price.
Molson Coors Brewing Co. (NYSE: TAP) was formed in 2005 through the merger of Molson of Canada and Coors of the United States. While the iconic American beer company did merge with a Canadian beer giant, it is still based in Chicago, with its main offices in Golden, Colorado, and Montreal. It pays an excellent 4.02% dividend. Molson Coors manufactures, markets, and sells beer and other malt beverages under various brands in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.
The company offers flavored malt beverages, including hard seltzers, craft spirits, energy drinks, and ready-to-drink beverages. It provides its products under these brands:
Aspall Cider
Blue Moon
Coors Original
Five Trail
Hop Valley brands
Leinenkugel’s
Madri
Miller Genuine Draft
Molson Ultra
Sharp’s
Staropramen
Vizzy Hard Seltzer
Premium brands include Bergenbier, Borsodi, Carling, Coors Banquet, Coors Light, Jelen, Kamenitza, Miller Lite, Molson Canadian, Niksicko, and Ozujsko.
The company also markets economy brands Branik, Icehouse, Keystone, Miller High Life, Milwaukee’s Best, and Steel Reserve.
Its strategic response to Bud Light’s marketing missteps a few years ago, which led to a surge in new customers, is a testament to its agility. Furthermore, the company is exploring new opportunities, such as the potential to market a cannabis-infused product.
Goldman Sachs has a Buy rating with a $57 price objective.
This New York City-based real estate investment trust (REIT) specializes in casino and entertainment properties. This is one of the top picks on Wall Street in the net lease group and is ideal for more conservative investors seeking gaming exposure and a solid 5.59% dividend. VICI Properties Inc. (NYSE: VICI) is an S&P 500 experiential REIT with one of the largest portfolios of market-leading gaming, hospitality, and entertainment destinations, including three iconic entertainment facilities on the Las Vegas Strip:
VICI Properties owns 93 experiential assets across a geographically diverse portfolio of 54 gaming properties and 39 other experiential properties across the United States and Canada. The portfolio comprises approximately 127 million square feet and features approximately 60,300 hotel rooms and over 500 restaurants, bars, nightclubs, and sportsbooks.
Its properties are occupied by industry-leading gaming, leisure, and hospitality operators under long-term, triple-net lease agreements.
VICI Properties has a growing array of real estate and financing partnerships with leading operators in other experiential sectors, including:
Bowlero
Cabot
Canyon Ranch
Chelsea Piers
Great Wolf Resorts
Homefield
Kalahari Resorts
VICI Properties also owns four championship golf courses and 33 acres of undeveloped and underdeveloped land adjacent to the Las Vegas Strip.
J.P. Morgan has an Overweight rating with a $38 target price.
As Dow Hits Record, High-Yield Dogs of the Dow Still a Bargain
