2 Sin Stocks With Killer Dividends

In the first months of 2015, too many of leading stocks have missed estimates, issued cautious guidance below analysts’ estimates and/or now have negative forecasted annual sales growth.

Dividend stocks to buy

I’m talking about companies like Chevron Corporation (NYSE:CVX), The Coca-Cola Co (NYSE:KO), McDonald’s Corporation (NYSE:MCD), Pfizer Inc. (NYSE:PFE) and Procter & Gamble Co (NYSE:PG).

There is clearly a major problem on the sales and earnings front for many large multi-international corporations, and only 15% of the mega-cap stocks are now worth investing in.

So, there is now a “seismic shock” rumbling through the S&P 500 that will have profound consequences for the overall stock market. A massive flight to more domestic stocks with real sales and earnings growth is now underway.

While the S&P 500 is barely squeaking by with single-digit top- and bottom-line growth, certain companies are still trouncing sales and earnings estimates, which is why I want to highlight two familiar names:

Altria Group Inc (NYSE:MO)

Altria Group Inc (NYSE:MO) is the largest tobacco company in the U.S. Altria’s subsidiary Philip Morris USA controls over 50% of the U.S. cigarette market.

Altria’s most popular brand — Marlboro — has been the best-selling cigarette for four decades. Then there is Altria’s U.S. smokeless tobacco business, which has a 55% market share in the U.S. Copenhagen and Skoal are two of the top smokeless tobacco brands in the U.S., each with retail sales exceeding $1 billion.

While Altria is known for its traditional tobacco products, it has been going full steam with Nu Mark; its MarkTen brand ranks in the top three e-cigarettes in the western half of the U.S.

A few weeks ago, MO announced that its fourth-quarter profits more than doubled last quarter compared with last year. Thanks to higher cigarette prices and its financial services division, Altria’s revenue rose 5% year-on-year to $4.61 billion, above the $4.51 billion consensus estimate.

Meanwhile, MO earnings jumped to $1.24 billion, or 63 cents per share. Excluding special items, adjusted earnings was 66 cents per share, which met analysts’ expectations.

Altria has evolved into a well-diversified company with strong fundamentals and a healthy dividend. I consider MO a Conservative stock and a “strong buy.”

Reynolds American, Inc. (NYSE:RAI)

Reynolds American, Inc. (NYSE:RAI) is another dividend heavy hitter with strong sales and earnings prospects. Reynolds American’s R.J. Reynolds Tobacco is the second-largest tobacco company in the U.S. and is responsible for popular brands like Camel, Pall Mall, Kool and Winston.

Reynolds American’s American Snuff division is the second-largest maker of smokeless tobacco products, including moist snuff brands Grizzly and Kodiak. The Santa Fe division is known for Natural American Spirit brand cigarettes and tobacco products. Reynolds American’s newest subsidiary, R.J. Reynolds Vapor Company, sells electronic cigarettes and nicotine replacement therapy products.

Last summer, Reynolds American and Lorillard Inc. (NYSE:LO) — the country’s second- and third-largest tobacco companies respectively — agreed to merge in a $27.4 billion deal. Lorillard is best known for making Newport cigarettes, the nation’s top-selling menthol and second overall cigarette brand.

With over $11 billion in combined revenue and $5 billion in operating income, the merger between RAI and LO would create a formidable competitor to the current industry leader, Altria.

The Reynolds and Lorillard deal, which should close in the first half of this year, is expected to generate $800 million in cost savings on a run-rate basis. I expect that some of those savings will be put towards beefing up RAI stock’s dividend (which is already at 3.7%). Buy Reynolds American stock.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

Article printed from InvestorPlace Media, https://investorplace.com/2015/03/dividend-altria-mo-reynolds-american-rai-lorillard-lo/.

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