During uncertain times, investors can rely on the reliability of dividend-paying stocks to weather the storm. Asset managers at Hartford Funds studied the performance of the benchmark S&P 500 index dating back to 1930 and found that dividend-paying stocks generate positive returns every decade. Throughout the Great Depression and the "lost decade" of the 2000s, when non-paying stocks fell, dividend-paying stocks remained stable.
They also found that since 1960, dividends accounted for an astonishing 84% of the total return of the index. By reinvesting dividends in the benchmark, the power of compounding helped turn a $10,000 investment into over $4.9 million, which otherwise would have been only $795,823 based solely on the index price.
Dividends can help mitigate the negative impact of a decline in the stock market on capital gains, and can serve as a vote of confidence that a company is willing to share profits with investors even during difficult times. This pair of dividend stocks is currently discounted, providing patient investors with the opportunity to enjoy substantial returns in the coming years.
Altria is a global tobacco corporation that owns the Phillip Morris USA cigarette brand among other tobacco products.
Tobacco giant Altria (MO 1.47%) has not attracted the market or competition in 2022, as its stock price has fallen 12% so far this year. Although the S&P 500 index may fall 17% this year, this cigarette manufacturer's performance is not impressive.
Most of this is due to the US Food and Drug Administration's ban on Juul Labs' e-cigarettes entering the market. Altria owns 34% of Juul. Despite a court order to reconsider its decision, damage has already been done. British American Tobacco's Vuse e-cigarette has grown its market share by 39%, while Juul's once dominant brand has fallen to 29.4%.
Following this, Philip Morris International announced its acquisition of Swedish Match, a direct competitor to Altria in the rapidly growing nicotine pouch market. This acquisition also allows direct access for global tobacco inventory into the US market, where it had been previously prohibited due to patent infringement on Altria's part after the company attempted to sell its IQOS heated tobacco device in the US.
Despite this, Altria still controls a large share of the American cigarette market through its Marlboro brand, which holds a nearly 43% market share. Although its investment in Juul prevented it from selling its own e-cigarette devices, the plummeting valuation of Juul now allows Altria to pursue its own e-cigarette plans freely. It is expected to submit its device applications for approval to the FDA by the end of this year.
Altria pays a yearly dividend of 9% and has been increasing its dividend for over 50 years, making it the king of dividends. Its stock price is also only eight times next year's earnings expectations, which, considering its dominant position and growth prospects, makes it look like a good deal.
MGM Resort.
Compared to most other companies in the casino industry, the stock price of MGM International (MGM 3.00%) remains high, despite a 24% decline so far this year. Since the outbreak of the pandemic, MGM's value has more than doubled, while its world-class competitors, Las Vegas Sands (up 53%) and Wynn Resorts (only slightly up by 6%), have seen minimal gains.
MGM Resorts, which has never had the same level of access to China as its peers, continues to perform well despite facing restrictions in various regions of China. Its second-quarter earnings show a 44% increase in revenue to $3.3 billion, with a net income of $1.8 billion. The company generated nearly $1 billion in adjusted earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR), which represents the cash flow of the resorts.
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