In the 1987 movie " Wall Street", Gordon Gekko becomes famous with his speech that "Greed is Good". Moving along this statement I believe that sin is good too, especially if the industry is stable, recession resistant and the participants have strong brands
that grow dividends.
Companies that raise dividends show confidence in their financial performance for the foreseeable future. When management expects lackluster performance, they are more likely to freeze or even cut distributions
. For example, back in 1998-1999 when the future of the tobacco companies was uncertain, the Board of Directors of Altria (MO) maintained the dividend payment for 7 consecutive quarters. But after they realized that the company would be able to survive, they kept raising dividends and were able to maintain the annual growth in distributions uninterrupted.
I have highlighted several "sin stocks", which not only have strong competitive advantages, but have also managed to consistently raise distributions for many years in a row:
Altria Group, Inc. (MO
), through its subsidiaries, engages in the manufacture and sale of cigarettes, wine, and other tobacco products in the United States and internationally. This dividend champion
has increased dividends for 43 years in a row. The company is a dominant player in the US tobacco market, with a 50% market share in 2009. This mature market is in decline however, and as a result future growth in earnings per share could be difficult to materialize. They would likely come from efficiencies related to restructuring, such as the closure of its Cabarrus facility as well as the integration of smokeless tobacco company UST, which Altria acquired in 2008
. Yield: 5.90% (analysis
Philip Morris International Inc. (PM
) , through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. The company has consistently raised distributions since Altria (MO) spun it off in 2008.