I recently published an article on Seeking Alpha outlining seven sin stocks with substantial dividend yields.
Two of them are alcoholic beverage companies which I’ve already published analysis articles on, and the other five are some of the world’s largest tobacco companies. The thing that these companies all have in common is that they generate tons of free cash flow because their products require little capital expenditure or new innovation, and sell reliably year after year. Free cash flow means plenty of capital to return to shareholders.
I personally don’t invest in tobacco companies, but for those that do, the article may be of use. It can be found here:
Seven Sin Stocks with Heavenly Dividend Yields
Christa
I never thought about “sin stocks” in this way (little capital expenditure needed). Great tip, but I think I would stick to alcohol companies over tobacco if I were to invest.
Matt
I would personally stick to alcohol companies as well. I don’t mind investing in alcohol but I have an issue with investing in tobacco.
Altria, the largest US tobacco company, was one of the best long-term stock market picks of the last few decades. A downside to a lot of sin stocks, and particularly the tobacco stocks, is that their companies have a lot of debt.
Harlan Patton
In some industries companies might choose a strategy of declining or negative FCF in the short term for a great increase in future shareholder value..One example is the oil industry and within that industry take a look at . Transocean and most oil drilling companies forego FCF in the short term to create immense shareholder value in the future..