It’s an old term, so old that many younger investors may not even really know what it means. While the term “stagflation” was coined in the early 1960s, it is most often associated with the dreadful economic conditions that were in place in the 1970s. After the Arab oil embargo early in the decade, the U.S. economy experienced five negative quarters of gross domestic product growth. Hence, you had a stagnant economy with rising inflation, or stagflation.
In a new research report, BofA Securities dug into the research archives looking for companies that performed well during periods of stagflation. They said this when discussing methodology: “We screened for the top 50 S&P 500 companies with the best historical performance during periods of stagflation (below-trend growth and rising inflation) – based on stocks with data available back to 1968 (165 companies).”
We in turn screened the BofA Securities list looking for dividend-paying stocks that were Buy rated at the firm, and were reasonably priced and produced among the highest median returns during periods of stagflation. We found five that are outstanding ideas for investors somewhat wary of the market but want to stay involved. While all these stocks are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This maker of tobacco products offers value investors a great entry point now and was hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs, and it has purchased a 45% stake in cannabis company Cronus for $1.8 billion.
Shareholders receive a 7.48% dividend. BofA Securities has a $58 target on Altria stock, and the Wall Street consensus target is $54.31. The shares closed Tuesday trading at $48.11 apiece.