Much of the conversation surrounding “sin stocks” over the past year has centered on a fresh entrant to the segment: Canadian marijuana producers. But while these new purveyors of “buzz” certainly present unique growth opportunities, they lack the stability and dividend potential of traditional sin stocks in the alcohol and tobacco industries.
Associate Stock Strategist Ryan McQueeney shifts the conversation back to the old school in today’s video, putting two companies—Vector Group (VGR - Free Report) and Constellation Brands (STZ - Free Report) —in the spotlight as investors look for new strategies in the early days of 2019.
Vector Group and Constellation Brands are two entirely different companies. The former is a strange combination of a discount cigarette maker and realty group, while the latter is one of the world’s largest beer distributors.
That said, both sit in similar positions from a particular investing perspective. VGR and STZ have been beaten down in the past year and currently trade near their lowest Forward P/E valuations in over 52 weeks. Both stocks also sport mixed earnings outlooks with shaky analyst revision activity.
The word Ryan uses to describe each stock’s earnings and valuation picture is “unconvincing.” But of course, there’s always another side to that coin.
After acknowledging the shortcomings of these stocks, Ryan flips the argument by building a bull case for investing in these companies.
For VGR, that thesis is all about the dividend. Vector Group has been distributing a $0.40 per share quarterly dividend for years now, and on an annualized basis, that payout represents a staggering 16% yield right now.
STZ, on the other hand, gives a modest 1.8% annualized dividend yield. The bull case for this stock is really about unrealized future growth. Constellation Brands currently owns a 38% stake in cannabis producer Canopy Growth (CGC), giving it direct exposure the aforementioned exciting growth segment within the broader “sin” category.
Want to hear more about what VGR and STZ might offer investors right now? Make sure to check out today’s video!
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