{"id":31652,"date":"2012-08-15T09:46:58","date_gmt":"2012-08-15T13:46:58","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/08\/naughty-or-nice-part-2-5-delightfully-sinful-dividend-stocks\/"},"modified":"2012-08-15T09:46:58","modified_gmt":"2012-08-15T13:46:58","slug":"naughty-or-nice-part-2-5-delightfully-sinful-dividend-stocks","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/08\/15\/naughty-or-nice-part-2-5-delightfully-sinful-dividend-stocks\/","title":{"rendered":"Naughty or Nice Part 2: 5 Delightfully Sinful Dividend Stocks"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

This is Part 2 of a two-part series on \u201cNaughty and Nice\u201d<\/a> \u00a0dividend stocks.<\/em><\/p>\n

In the last article, I gave you five socially-responsible stock picks that you could feel good about owning.\u00a0 Now, we\u2019re going to go a very different direction.\u00a0 In this article, I\u2019m going to give you five delightfully naughty dividend-paying stocks to consider.<\/p>\n

I\u2019ll start with a confession: I love sin stocks, and I always have.\u00a0 Because they are politically incorrect, companies in the tobacco, alcohol and defense industries tend to trade at lower valuations and higher dividend yields than the broader market.\u00a0 In effect they are perpetual value stocks, and investors with no qualms about investing in stocks with social stigmas attached to them benefit from this pricing.<\/p>\n

For a longer explanation on the virtues of being bad, see \u201cThe Price of Sin<\/a>.\u201d<\/p>\n

As I\u2019ve written before, \u201cNot All Sin Stocks are Created Equal<\/a>,\u201d and not all vice investments are strong dividend payers.\u00a0 But the following five stocks all pay current yields well in excess of the market average.<\/p>\n

I\u2019ll start with a sin stock standard, American tobacco giant Altria ($<\/span>MO<\/a>)<\/strong>. \u00a0As the poster boy for Big Tobacco, Altria is probably the most hated company in history. If Altria were a movie character, it would be Darth Vader.<\/p>\n

It also happens to be the most profitable investment in history, according to Jeremy Siegel\u2019s The Future for Investors<\/em>.\u00a0 Dr. Siegel\u2019s calculation assumed the reinvestment of dividends, of course. \u00a0\u00a0And when you buy shares of Altria, you should accept that you are buying the stock specifically for its dividend because the company\u2019s business is in long-term terminal decline.\u00a0 Cigarette smokers will continue to light up, but their ranks are not growing and cannot be expected to.<\/p>\n

At current prices, Altria yields 4.70%.\u00a0 This is a little lower than I would normally like to see for a tobacco stock, but it still makes Altria one of the highest-yielding stocks in the S&P 500.<\/p>\n

Some of the best values in the vice sphere are in the \u201cmerchant of death\u201d category, and the next stock is one that I covered in \u201cFive Smart Money Dividend Stocks<\/a>\u201d as a stock owned by Magic Formula guru Joel Greenblatt: defense and aerospace firm Northrop Grumman Corporation ($<\/span>NOC<\/a>).<\/strong><\/p>\n

Northrop Grumman makes the sort of toys you might expect to see in a James Bond movie. Its aerospace division sells hardware and systems to government agencies for use in various mission areas, including intelligence, surveillance and reconnaissance, battle management, strike operations, electronic warfare, missile defense; earth observation and space exploration.<\/p>\n

Northrop Grumman trades for just 9 times expected 2013 earnings and yields an impressive 3.3% in dividends.<\/p>\n

Next on the list is one of Northrop Grumman\u2019s competitors, Raytheon Company ($<\/span>RTN<\/a>)<\/strong>. Raytheon offers integrated defense systems, including integrated air and missile defense, naval combat systems, and intelligence systems.<\/p>\n

Raytheon is priced comparably to Northrop Grumman, trading for just 9 times earnings and yields 3.6%.<\/p>\n

The entire defense sector is attractively priced at this time, and Northrop Grumman and Raytheon are two excellent dividend stocks.<\/p>\n

Moving down the list of all things naughty, we come to booze.\u00a0 And the single best play in the world of spirits is British-based Diageo PLC ($<\/span>DEO<\/a>)<\/strong>, the largest and most diversified seller of premium alcoholic beverages in the world.<\/p>\n

Diageo\u2019s brands include Johnnie Walker scotch, Smirnoff vodka, Baileys Irish Cream liqueur, Crown Royal Canadian whiskey, Captain Morgan rum, Jose Cuervo tequila and many, many others.\u00a0 The company has been a long-time favorite of the Sizemore Investment Letter for its exposure to emerging markets; Diageo already gets 40% of its revenues from emerging markets, and this number grows every year (see \u201cDiageo: the Ultimate 12 to 18 Year Play<\/a>\u201d).<\/p>\n

Diageo is a current constituent of the Mergent International Dividend Achievers Index, meaning the stock has a long history of raising its dividend, and currently yields a respectable 2.0%.<\/p>\n

Another stock in the alcohol sphere I like is Dutch mega-brewer Heineken NV ($<\/span>HINKY<\/a>)<\/strong>.<\/p>\n

The global beer market is dominated by the Big 4\u2014Anheuser Busch InBev ($<\/span>BUD<\/a>)<\/strong>, Heineken, SABMiller ($<\/span>SMBRY<\/a>)<\/strong> and Carlsberg\u2014though beer sales have been stagnant in the company\u2019s core American and European markets.\u00a0 Sales are booming in emerging markets, however, and the Big 4 continue to gobble up small local brands with reckless abandon.<\/p>\n

Heineken is unique among Western multinationals in that it is not only a great indirect play on rising incomes in the developing world, but it is a great play on the development of Africa in particular.\u00a0 Heineken already gets roughly a quarter of its revenues from Africa, and this percentage will only rise over time as the African middle class grows and develops.<\/p>\n

Heineken pays a decent dividend of 2.1%.<\/p>\n

So there we have it.\u00a0 Investors looking to build an income portfolio have their choice of both naughty and nice dividend-paying stocks.\u00a0 I recommend they take their pick of both.<\/p>\n

Disclosures: Sizemore Capital is long MO, DEO and HINKY. This article first appeared on InvestorPlace<\/a>.
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