While it is becoming clear that inflation is dropping, November’s consumer price index came in up 7.1% year over year (versus expectations for 7.3%), the reality is that costs for essential items like food remain very high. In addition, one reason for the declining inflation numbers is that the price of oil has fallen dramatically this year, but with inventories dangerously low, many in the energy sector think we could see $120 a barrel or more later next year.
Though investors are hopeful that Tuesday’s rally is the beginning of a new bull market, the truth is that layoffs are accelerating, inflation is still sky-high and, most importantly, the year-long interest rate increases will continue in the first quarter. When the terminal or ending target is reached, it is likely to be in the 5.00% to 5.25% range after the latest 50-basis-point increase and another in January.
Federal Reserve Chair Powell has made it clear that when the terminal rate level is attained, it will remain, as the mantra goes, “higher for longer.” That means any cut in the federal funds rate is unlikely until 2024. More importantly, the effect of interest rate increases is always lagging, so they will really start to be felt next year.
We screened our 24/7 Wall St. research universe search for Buyated stocks that pay at least a 5% dividend, and we found five top companies that look like incredible year-end bargains. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Altria
This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business. In December 2018 it acquired 35% of Juul Labs, but the stock was pounded last summer when the FDA announced a ban on all sales of Juul vape pens.
In October, the company, which at the height of its popularity dominated the market with its sweet flavors, agreed to pay $438.5 million in a settlement with 33 states and one territory over marketing its Juul product to teens. Altria announced recently that it is looking to end its noncompete agreement with Juul to compete more aggressively in the vape space on its own.
While this gets sorted out, it is a good bet that investors will still receive an 8.01% dividend. Stifel has a $50 target price on Altria stock. The consensus target is $48.73, and shares closed on Tuesday at $46.81.
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