Finding stocks that are trading down after the worst first half for the S&P 500 in over 50 years is not hard these days. Finding the companies that also pay big dividends and are likely to keep them is a far different story. Often companies end up in a situation where a one-off event occurs, or a change in the economy can damage the products or services a company provides, and that puts a big-time hurt on the stock price. That is the time for nimble investors to buy shares.
One big advantage to buying beaten-down stocks with substantial dividends is that one is paid to wait for the recovery. While that can take a while, dividends will arrive four times a year. In addition, selling covered call options also can enhance the income profile.
We screened our 24/7 Wall St. research database looking for well-known stocks that have been hammered but look like solid ideas for investors, and we found six that look ripe for the picking. They all are rated Buy on Wall Street, but 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 as it has been hit 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 2008, it spun off its international cigarette business to shareholders. The stock was pounded recently, as last month the U.S. Food and Drug Administration announced the ban of all sales of Juul vape pens. This decision was made after pleas from government officials and public health institutes that say Juul is focused on selling its nicotine products to teenagers. A court has granted Juul’s request for a stay on the ban, allowing the company to still sell the products while an appeal is made on the decision.
While this gets sorted out, it is a good bet that Altria stock investors still will receive a giant 8.71% dividend. Deutsche Bank has a $46 target price on the shares, and the consensus target is even higher at $52.33. The shares closed on Tuesday at $41.72 apiece.
The legacy telecommunications company has been going through a long restructuring, has lowered its dividend and has sold off or merged underperforming assets. AT&T Inc. (NYSE: T) provides telecommunications, media and technology services worldwide.
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