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Don't let the name fool you -- sin stocks aren't in the business of burning down old folks' homes. Instead, they're companies that operate in industries like alcohol, tobacco, gambling, and defense. And as an income investor, sin stocks could be the most wholesome addition to your portfolio.
In a lot of ways, sin stocks are purpose-built income machines in good times and bad. For starters, sin stocks tend to be businesses that provide a stress outlet for consumers. As a result, recession resistant revenues and sticky customer bases are the norm. The devil's in the details with sin stocks; because these firms generally sport wide economic moats and deeper margins than traditional consumer plays, sin stocks benefit from an extra qualitative boost that you can't find in any other group right now.
When investor anxiety is ramped up, sin stocks really shine. Just take a look at what they've done in anxiety rally the past year: while the S&P 500 has rallied an impressive 15.9%, the aptly named
Vice Fund (VICEX) had climbed 22.2%.
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But our focus today is dividends, not just capital gains. And instead of chasing payouts, we'll try to step in front of the next round of sin stock payout hikes.
Over the last three and a half decades, dividend stocks have outperformed the rest of the S&P 500 by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, all while paying out cash to their shareholders, based on data compiled by Ned Davis Research. The numbers are even more compelling when looking at companies that consistently increase their payouts.
For our purposes, that "crystal ball" is composed of a few factors: namely a solid balance sheet, a low payout ratio, and a history of dividend hikes. While those items don't guarantee dividend announcements in the next month or three, they do dramatically increase the odds that management will hike their cash payouts.
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Without further ado, here's a look at
five sin stocks that could be about to increase their dividend payments in the next quarter.