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3 Hated Dividend Stocks to Buy Now

By Rick Munarriz - Apr 23, 2020 at 8:30AM

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A tobacco giant, factory outlet mall operator, and telco icon are among three high-yielding stocks that offer capital appreciation upside on their out-of-favor stocks.

Interest rates are near historic lows, and that's giving fixed-income investors a good reason to consider high-yielding dividend stocks. The risks are greater in the realm of equities, but the same can be said about the potential rewards above and beyond the beefy payouts.

Some dividend stocks aren't getting the kind of love they deserve at the moment. Altria (MO 1.15%), Tanger Factory Outlet Centers (SKT 1.69%), and AT&T (T 1.67%) are out-of-favor at the moment, but that's not necessarily a bad thing. Recent sell-offs have pushed their chunky yields even higher, so let's go over why these hated high-paying investments are worth buying now.

A jar of coins sealed shut with a label that reads dividends on the outside.

Image source: Getty Images.

Altria

Tobacco isn't a popular topic for some investors, and Altria has doubled down within the sin-stock universe by taking ownership stakes in wines, vaping, and cannabis. There are some other issues with Altria, but now would be as good a time as any to point out that Altria's slide leaves the stock commanding a yield of 8.9% at the moment. 

Altria is good for the quarterly distributions. It has boosted its dividend 54 times over the past 50 years. There are long-term concerns about the future of smoking, and even Altria's Marlboro Man isn't immune to the trend. The company introduced a new CEO earlier this month, and that may lead some to wonder what will change at Altria. It has seen the value of its vaping and cannabis investments shrink. Legal liabilities are mounting on most fronts. However, through all this Altria finds ways to keep growing. It has posted eight consecutive years of revenue growth. Altria may have problems five to 10 years from now, but there's serious near-term upside potential in both the huge quarterly dividend checks and the potential for capital appreciation. 

Tanger Factory Outlet Centers

The riskiest name on this list -- and also the hardest hit -- is Tanger Factory Outlet Centers. The operator of strip malls featuring brand-name clearance outlets is understandably getting pinched these days. Physical retail is toast for now, and one can only imagine how many of Tanger's tenants aren't paying rent. 

The REIT's trailing 27.6% yield isn't reliable. Tanger expects to pay its next quarterly distribution in May, but it will be deciding on its payouts on a quarterly basis beyond that. In short, a steady rock star that had boosted its dividend every year since going public in 1993 -- including an increase in January -- is highly unlikely to keep that streak going now. 

The bullish thesis for Tanger Factory Outlet Centers now even with a likely diminished if not entirely eliminate dividend comes in the form of capital appreciation. Tanger's 97% occupancy rate won't be the same at the other end of this pandemic, but bargain-seeking shoppers will flock to outlet centers in lieu of traditional malls to get more bang for their recession-blasted buck. A 64% year-to-date plunge in the REIT is brutal, but right now it appears overdone for a niche leader. 

AT&T

The telco giant rebounded was a big winner last year, soaring 45% on activist-fueled changes. It has since surrendered most of those gains, and this week's quarterly report was disappointing. AT&T missed Wall Street's revenue and earnings targets for the first quarter.

The story at AT&T remains the same. Its wireless business is holding up well, but it's losing ground in pay TV and its older legacy businesses. The big WarnerMedia acquisition is also coming under pressure in the current operating climate. However, with AT&T shaving costs but still making sure it has enough money available to launch the promising HBO Max streaming service next month and deploy 5G to boost its wireless business, one can't write off AT&T. It's also a Dividend Aristocrat, with a yield that poked above 7% following Wednesday's earnings-related drop. 

Altria and AT&T aren't market darlings right now, and that's just fine. Sometimes the best dividend stocks are the ones that are out of favor.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$21.31 (1.67%) $0.35
Altria Group, Inc. Stock Quote
Altria Group, Inc.
MO
$42.25 (1.15%) $0.48
Tanger Factory Outlet Centers, Inc. Stock Quote
Tanger Factory Outlet Centers, Inc.
SKT
$14.46 (1.69%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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