One category that some portfolio managers avoid discussing, especially in the ESG (environmental, social, governance) era, is the so-called sin stocks. These are companies that sell tobacco, alcohol and marijuana products, run gambling casinos, or are sex-related industries or weapons manufacturers. While at the margin they may not all seem sinful, some money management companies refuse to own any of them.
We screened our 24/7 Wall St. research database for companies that fall into this rather dubious category and found five stocks that look like outstanding values. They are all rated Buy, pay solid and reliable dividends and should hold up well even in a protracted bear market.
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, which some feel is worth more than $10 billion and may be a segment of the company that could be sold. Given the issues the brewer has had this year, it may indeed be a candidate to be monetized.
Investors receive an 8.56% dividend. Stifel has a $52 target price on Altria stock. The consensus target is $49.44, and the shares ended Tuesday trading at $43.07.
This is one of the largest producers of alcoholic beverages in the world. Diageo PLC (NYSE: DEO) produces, markets and sells alcoholic beverages worldwide, including scotch whiskey, gin, vodka, rum, beer, 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 include Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness.
Diageo’s 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 and other Johnnie Walker super-premium brands, as well as The Singleton, Cardhu, Talisker, Lagavulin and other malt brands.
Shareholders receive a 2.34% dividend. BofA Securities has set a $196 price target, and Diageo stock has a consensus target of $184.01. The closing share price on Tuesday was $170.88.
This remains a top aerospace and defense stock to buy, and it has backed up nicely for investors looking to add shares. Lockheed Martin Corp. (NYSE: LMT) researches, designs, develops, manufactures, integrates, operates and sustains advanced technology systems, products and services. It also provides a wide range of defense electronics products and IT services.
Being the Pentagon’s prime contractor, Lockheed Martin offers a diverse portfolio of global aerospace, defense, security and advanced technologies. Its leveraged presence in the Army, Air Force, Navy and IT programs guarantees a steady inflow of follow-on orders, not only from the U.S. government but also from many foreign allies of the nation.
Over the past several years, Lockheed Martin’s backlog has substantially outgrown the rest of the industry, supporting the growth outlook for the foreseeable future. The company has exposure to U.S. Department of Defense priority buckets and consistently executes well. Even if the end market growth rate slows, continued strong fundamentals, with compounding earnings and cash flows, are to be expected.
The dividend yield here is 2.67%. The $550 Credit Suisse price objective is well above the consensus target of $422.72. Lockheed Martin stock closed on Tuesday at $443.58.
This iconic American beer company did merge with a Canadian beer giant, but it is still based in Denver. Molson Coors Beverage Co. (NYSE: TAP) is one of the world’s largest brewers (more than a 3% global share) with core brands Coors Light, Miller Lite, Carling, Molson Canadian and Staropramen.
Molson and Coors merged in February 2005 and added StarBev in 2012, and it serves markets including the United States, Canada, Eastern Europe and the United Kingdom and Ireland, with exposure to other markets through its Molson Coors International division. It acquired the remainder (58%) of the U.S. joint venture (MillerCoors) in mid-October 2016.
The Coors light brand remains a huge favorite with Generation X and baby boomers, who were all around when the light beer revolution started. The brand was a huge winner in the Bud Light marketing fiasco, which helped boost second-quarter results. The company is now working on opportunities to market a cannabis-infused product.
Molson Coors Beverage stock comes with a 2.54% dividend. The Jefferies price target is $75, and the consensus target is $68.78. The shares closed on Tuesday at $63.65.
This is the top pick across Wall Street in its segment and is an ideal pick for investors who are more conservative and looking for gaming exposure. VICI Properties Inc. (NYSE: VICI) is an experiential real estate investment trust that owns one of the largest portfolios of market-leading gaming, hospitality and entertainment destinations, including Caesars Palace Las Vegas, MGM Grand and the Venetian Resort Las Vegas, three of the most iconic entertainment facilities on the Las Vegas Strip.
Its geographically diverse portfolio consists of 50 gaming facilities across the United States and Canada with approximately 124 million square feet and approximately 60,300 hotel rooms and more than 450 restaurants, bars, nightclubs and sportsbooks. Its properties are occupied by industry-leading gaming and hospitality operators under long-term, triple-net lease agreements.
In addition, VICI Properties has a growing array of investing and financing partnerships with leading non-gaming experiential operators, including Great Wolf Resorts, Cabot, Canyon Ranch and Chelsea Piers. The company also owns four championship golf courses and 34 acres of undeveloped and underdeveloped land adjacent to the Las Vegas Strip.
Shareholders receive a 5.05% distribution. VICI Properties stock has a $41 target price at BNP Paribas, while the consensus target is $37.52. Shares closed on Tuesday at $30.04.
In a market correction, all stocks generally trend lower, but these dividend-paying sin stocks will continue to have strong product demand, and they should hold up much better than momentum technology stocks, especially those that are not making money.
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