Last week, and once again on Monday, investors showed a large degree of risk-off panic as the Treasury market saw some serious selling and interest rates went higher across all maturities. Still, rates are historically very low, and the spread between the five-year and the 30-year bonds is a paltry 57 basis points. Nevertheless, investors are scared, and the sellers appear to have the upper hand, as the Federal Reserve has made it clear that interest rates will be going higher this year, maybe as early as March.
One category of Wall Street that some portfolio managers really do not want to discuss in their portfolios are 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 at the margin they do not all seem that 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 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 7.12% dividend. Piper Sandler team has a $53 target price for Altria stock, and the analysts’ consensus target is just $48.33. Shares closed on Monday at $50.54.
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.
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 and other Johnnie Walker super-premium brands, as well as The Singleton, Cardhu, Talisker, Lagavulin and other malt brands.
Shareholders receive a 1.87% dividend. The BofA Securities price target of $249 is well above the $225.34 consensus target. Diageo stock closed at $211.29 on Monday.
This is one of the top aerospace and defense stocks to buy, and it has backed up nicely for investors looking to buy 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 Department of Defense priority buckets and consistently executes well. Even if the end-market growth rate slows, analysts expect continued strong fundamentals, with compounding earnings and cash flows.
Lockheed Martin stock investors receive a 3.11% dividend. The $430 Morgan Stanley price target compares with a $385.71 consensus target and the most recent close at $363.25.
Gun owners are very familiar with this top company that pays a stellar dividend. Sturm, Ruger & Co. Inc. (NYSE: RGR) engages in the design, manufacture and sale of firearms to domestic customers.
The Firearms segment manufactures and sells rifles, pistols and revolvers principally to a number of federally licensed, independent wholesale distributors primarily located in the United States. The Castings segment manufactures and sells steel investment castings and metal injection molding parts. The company was founded by William B. Ruger in 1949 and is headquartered in Southport, Connecticut.
While the dividend can vary because the payout is based on earnings, given the company’s strong upside, it is worth taking despite some slowing demand.
Investors currently receive a 4.94% dividend. Lake Street Capital has set a huge $98 price target. The consensus target on Sturm Ruger stock is $84.00, and Monday’s closing print was $68.36 a share.
This is the top pick across Wall Street in the net lease group, and it is an ideal stock for investors who are more conservative and looking for gaming exposure. VICI Properties Inc. (NYSE: VICI) is a triple net lease real estate investment trust (REIT) that was spun out of Caesars Entertainment post-bankruptcy.
The company has 23 mixed-use gaming, lodging and entertainment properties in its portfolio, and a subsidiary that owns four championship golf courses. VICI also owns roughly 34 acres of undeveloped land in Las Vegas, which it leases to Caesars.
Much of the focus this year was on VICI’s recent deal to acquire the real estate of the Venetian Resort in Las Vegas, with Apollo as a new tenant. Looking ahead, many on Wall Street are very positive on VICI’s embedded growth pipeline with Caesars Entertainment, including a put/call on the Centaur properties in Indiana (starting this month) and a right of first refusal on a strip asset sale for Caesars, which could occur soon after a full earnings before interest, taxes, depreciation, amortization and restructuring or rent costs recovery.
Investors receive a 5.04% distribution. The BofA Securities price target for VICI Properties stock is $36. The consensus target is $34.89, and the shares closed on Monday at $28.71 apiece.
In a significant market correction, all stocks may trend lower, but these dividend-paying sin stocks will continue to see strong product demand and should hold up much better than momentum technology stocks, especially those that are not making money. Given the current negative backdrop to the market, investors may want to buy partial positions now and see how things play out over the next few weeks.