8 Stocks in the Penalty Box That Offer Big Upside and Passive Income Dividends as High as 9%
Finding stocks that are trading down after the worst first half for the S&P 500 in over 50 years, and a third quarter that is rolling over big time, is not hard these days. Finding the companies that also pay big dividends and are likely to keep them is a different story. Often companies end up in a situation where a one-off event occurs, or a change in the economy that can damage the products or services a company provides puts a big-time hurt on the prices of the stock. That is the time for nimble investors to buy shares.
One big advantage to buying beaten-down stocks with substantial dividends is that investors are paid to wait for the recovery. While that sometimes can be a while, four times a year the dividends will arrive. 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, looking for solid ideas for investors. These eight well-known stocks look ripe for the picking, and all are rated Buy on Wall Street.
It is important to remember that no single analyst report should be used as the 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.
Last week, Juul Labs agreed to pay $438.5 million to settle claims by 34 U.S. states and territories that it downplayed its products’ risks and targeted underage buyers, several states announced. As part of the settlement, Juul has agreed to refrain from some kinds of marketing, including the use of cartoons, product placement and depictions of users under 35. The deal stems from a two-year investigation led by Connecticut, Texas and Oregon.
Altria already has marked down the investment, and while everything gets sorted out, investors will receive a 9% dividend. Deutsche Bank has a $46 target price on Altria stock, and the consensus target is even higher at $49.28. The shares ended Thursday trading at $42.01 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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