Editors' pick: Originally published Jan. 23.
Shares of alcohol, cigarette and gambling companies are aptly called 'sin' stocks, given the various ethical and health concerns associated with them.
However, despite those potential concerns, some of the stocks in this category bring in rock-solid gains from virtually certain demand.
These three companies offer dividend yields of more than 3%, backed by billions of dollars in profit.
1. Altria (MO - Get Report)
The company has leading positions in the most profitable tobacco categories: cigarettes and smokeless tobacco. Its four premium brands, Black & Mild, Copenhagen, Marlboro and Skoal, are market leaders.
Altria has a target dividend payout ratio of about 80% of adjusted earnings per share. The annualized dividend rate is $2.44 a common share, and the dividend yield is about 3.5%.
What's more, Altria has increased its dividend every year for the past eight years. The company has also generated about $4 billion to $5 billion in free cash flow over the past three years.
These fundamentals guarantee that Altria will be an exceptional income-generator.
For four years in a row, Diageo has generated more than $2 billion in profit, while bringing in $10 billion to $11 billion in annual sales. Its products are sold in more than 180 countries around the world.
The company's shares offer a dividend yield of 3.4%, or $3.69 a share annually. Diageo pays out 64% of its profits as dividends, which indicates that the company will likely be able to continue increasing its dividend.
In fact, Diageo has a mutually beneficial relationship with the casinos that stock its liquor. These gambling establishments drive earnings for both sides, ensuring that Diageo continues to generate income for investors.
3. Las Vegas Sands (LVS - Get Report)
This company has a 5% dividend yield and four years of rising dividends. The company owns iconic properties including The Palazzo, the Venetian and Sands Expo in Las Vegas, as well as the Sands Bethlehem in eastern Pennsylvania.
Las Vegas Sands propelled annual revenue from $2.2 billion 10 years ago to more than $11 billion in 2015. The company enjoys 40%-plus gross margins and generates nearly $2 billion in annual profit.
This kind of market-beating growth makes Las Vegas Sands an excellent income stock.
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