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Sin Stocks Are More Than Fun to Own

By Travis Hoium - Updated Apr 6, 2017 at 10:16AM

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Why not let bars and casinos pay you back next time?

My favorite line from Aziz Ansari's comedy special comes from a story about a trip to a nightclub with rapper Jay-Z. He says, "Jay-Z is drinking vodka he makes. Jay-Z signs the tab, money goes back in his own pocket." But you don't have to be Jay-Z to profit from sin stocks and enjoy profit while sipping a beer or playing blackjack at a casino.

A taste for all vices
There's more than meets the eye to some classic sin stocks. Not only do they have great brands and solid financials, some pay fat dividends to shareholders. Below are a few sin stocks that will pay you back every year for enjoying their products.


Market Cap



Diageo (NYSE: DEO)

$43.5 billion



Molson Coors Brewing Company (NYSE: TAP)

$8.8 billion



Altria (NYSE: MO)

$50.0 billion



Wynn Resorts (Nasdaq: WYNN)

$10.7 billion



Source: Yahoo! Finance.

If sin stocks are for you, there are a few products we need to cover before deciding which is right for you. Like stretching before a track meet, let's start off slow with our good friend beer.

Yes, I'll have another
The beer business has to be one of the most rock solid businesses around. There are economies of scale, complex distribution networks and billion-dollar brands keeping the big dogs on top. Plus, it's beer, so how could that business ever go in the tank?

Molson Coors just happens to be my favorite among the big brewers but if you're looking to stay away from the big dogs, go no further than Boston Beer Company (NYSE: SAM). The maker of Sam Adams has added Twisted Tea, a malt beverage product, to its repertoire, and has a 21.9% earnings growth rate over the last five years. A few years ago I thought there were no growth opportunities left for a craft brewer trading at a 20+ price/earnings ratio, but boy was I wrong. The stock has nearly doubled over the last year and earnings have never been better.

Something stronger, please
If Johnnie Walker Scotch is more your style, then I offer you Diageo and will throw in Smirnoff, Bailey's and Crown Royal. Very few companies can offer the brand quality of Diageo and a worldwide distribution channel. Diageo also has net margins twice substantially higher than Boston Beer (15.9% to 9.2%). But Diageo's trailing net margin sits about two percentage points lower than that of rival Brown-Forman (NYSE: BF-B), maker of Jack Daniel's and Southern Comfort.

The international liquor business also has plenty of room to grow as more consumers enter the middle class throughout the world. In 2010, Diageo's organic sales growth was 16.3% in the Middle East/North Africa segment and 15.4% in Latin America and the Caribbean. Other geographies, such as Russia and Asia do quite well too. Diageo is doing a solid job of leveraging brands in emerging markets.

Out for a smoke at the poker game
It's hard to argue with a 6.3% dividend and a 14.6 P/E ratio for most companies, but Altria isn't just any company. It makes Marlboro, Parliament, and Skoal tobacco products, just to name a few. This is not exactly an investment for everyone. Still, it looks like the most major lawsuits are behind the tobacco business, so this should be safe for now, unless people stop smoking.

If you pick the right gaming stock you can get great exposure to emerging markets and an economic recovery. Wynn Resorts has a big presence in Macau, China, which is now the world's biggest gaming market. For more exposure to Asia, Las Vegas Sands (NYSE: LVS) has built casinos in Macau and now Singapore, moving beyond the traditional Las Vegas market.

We found out during the recession that gambling isn't the recession-proof business we once thought it was, but that leaves plenty of upside in a rebound. Both Las Vegas Sands and Wynn will be huge beneficiaries of a recovery stateside and expansion in Asia, as the economy recovers. As an added bonus, if the U.S. does get China to revalue or float its currency, it could be a boon to casino investors. As Las Vegas Sands CEO Sheldon Adelson said, "The floating of the yuan would be like a grand slam home run, World Series, Super Bowl, and N.B.A. championship game all packed in one for us."

You don't have to go home, but you can't stay here
There are plenty of opportunities in sin stocks so do your homework and find out which one is right for you. Tell us what your favorite sin stock is in the comments section below.

Interested in reading more about sin stocks? Add your favorite sin stock to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

Go forth and sin some more:

Fool contributor Travis Hoium always goes all-in with Aces and is long LVS and short LVS call options. Boston Beer is a Motley Fool Stock Advisor selection. Diageo is a Motley Fool Income Investor recommendation. The Fool owns shares of Altria, Diageo, and Molson Coors Brewing. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Molson Coors Beverage Company Stock Quote
Molson Coors Beverage Company
$54.07 (2.19%) $1.16
Altria Group, Inc. Stock Quote
Altria Group, Inc.
$44.10 (-0.34%) $0.15
Diageo plc Stock Quote
Diageo plc
$188.37 (-0.86%) $-1.63
Las Vegas Sands Stock Quote
Las Vegas Sands
$38.37 (-2.37%) $0.93
The Boston Beer Company, Inc. Stock Quote
The Boston Beer Company, Inc.
$375.87 (-0.85%) $-3.24
Wynn Resorts, Limited Stock Quote
Wynn Resorts, Limited
$66.71 (-0.58%) $0.39
Brown-Forman Corporation Stock Quote
Brown-Forman Corporation
$75.54 (-0.74%) $0.56

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

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