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Recession Proof Stock: This dividend stock will beat the U.S. recession

Posted March 10, 2008

“In addition to this solid fundamental footing, this stock boasts a 4.3% dividend. And dividend-paying stocks usually hold up much better in a bear market than non-dividend-paying stocks.” — Rick Pendergraft

by Rick Pendergraft

Baltimore – (TFN):  If I told you there is a stock that more than doubled during the last recession, would you be interested? If I told you it also doubled during the recent bull market - from 2003 to last year - would you would be even more interested?

Well, UST Incorporated (UST: NYSE), formerly known as U.S. Tobacco, did just that.

The company has two product lines: smokeless tobacco and wine. Their smokeless tobaccos include Skoal and Copenhagen. Their wines include Chateau Ste. Michelle, Columbia Crest, and Domaine Ste. Michelle.

UST has a profit margin of 26.7% and an operating margin of 46%. The return on assets is a robust 38.6%. In the most recent quarter, UST showed a year over year revenue growth of 13.1%, and is expected to show growth of 9.3% in the current quarter.

In addition to this solid fundamental footing, this stock boasts a 4.3% dividend. And dividend-paying stocks usually hold up much better in a bear market than non-dividend-paying stocks.

Despite all this, Wall Street is far from enthusiastic about the stock. But that’s not a bad thing. Of the 10 analysts following UST, five rate it a “buy,” two rate it a “hold,” and three rate it a “sell.” This leaves plenty of room for them to upgrade the stock - and when they do, the stock will move higher.

Another bit of negativity that will add fuel to the fire of any UST rally is that its short interest ratio is a healthy 4.9, with over 7.5 million shares sold short.

Given the current state of our economy, UST is a good stock to have in your portfolio. Even if we manage to stay out of a recession, UST looks poised to move higher. If we slip into a recession, it could perform even better. Find more stock picks by Rick Pendergraft at Early to Rise.

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