Tax refund day is the most wonderful time of the year for some. It's not every day that cash appears in your bank account, seemingly by magic. According to the Internal Revenue Service, or IRS, this year's average refund so far has been $3,011.
I know -- it's tempting to spend that money and splurge to treat yourself. But consider this before booking that vacation you've been waiting for: A tax refund isn't free money. It's wages you've earned. It's a great opportunity to put that money to work on your behalf by investing in the stock market.
A few thousand today could be tens of thousands of dollars later in your life. So, here are three excellent stocks worth buying and stashing in your portfolio. The average tax refund will buy you at least a share of each.
1. A fantastic investment for those who like to play it safe
Tobacco giant Altria Group(NYSE: MO) is a stock that will put a lot of cash back in your pocket. How? Let me explain. Altria owns and sells Marlboro cigarettes, On! nicotine pouches, John Middleton cigars, and Copenhagen and Skoal oral tobacco in the United States. While the U.S. smoking rate has plummeted over the years, Altria's business has proven resilient due to population growth and its pricing power.
You won't mistake Altria for a growth stock, but the business is alive and well, as you can see below. It does over $9 billion in free cash flow, and that metric has risen over the years despite revenue trailing off. No, smokeable products, roughly 90% of Altria's profits, can't carry the business forever. Fortunately, Altria is emphasizing its non-smoking products to help shoulder the load eventually.
MO Free Cash Flow data by YCharts
The company is famous for its legendary dividend track record, which includes over five decades of growth and a whopping 9.5% yield at today's share price. High-yield stocks are often a red flag, but Altria's dividend payout ratio is comfortable at 74%. Buy Altria and enjoy the passive income that comes your way.
2. This is an excellent stock for growth-hungry investors
Ride-hailing company Uber Technologies(NYSE: UBER) dominates the U.S. to the point that people don't "hail a ride" -- they "call an Uber." Ride-hailing, which involves summoning transportation through a smartphone app, has become a tremendous industry in the U.S., one in which Uber holds roughly 74% market share. Uber has also incorporated other services like food and parcel delivery into its app.
The company went public right before the pandemic. Lockdowns were brutal on Uber's business, which plunged into a cash-burning frenzy. However, the company has risen like a phoenix to new levels of profitability, and free cash flow has taken off over the past two years.
UBER Free Cash Flow data by YCharts
Uber is just warming up for immense bottom-line growth. Earnings should multiply as revenue rises faster than expenses. Analysts believe the company can grow earnings per share by an average of almost 52% annually over the next three to five years. Hitch your portfolio to Uber and ride the stock to what should be impressive long-term results.
3. This bargain is a prime rebound candidate
The popular coffee chain Starbucks(NASDAQ: SBUX) trades near its 52-week low. The company was once a regional coffee house but has expanded into a global force with over 38,000 stores today. Caffeine is addictive, and the recognizable logo and widespread store presence have combined to fuel decades of growth built on fantastic brand loyalty. Its rewards program has over 34 million U.S. members.
The stock has stumbled over the past year and is now down 32% from its former high. Why? Worries over competitive footing in China, a strategic growth market for Starbucks, could be blamed. However, thus far, it doesn't seem like Starbucks is struggling too much. Its sales chart below is virtually a straight line to $37 billion, the pandemic being the only significant bump in the road.
SBUX Revenue (TTM) data by YCharts
Notably, analysts remain bullish on Starbucks' prospects. Consensus estimates call for over 15% annualized earnings growth over the next three to five years. If management can meet those expectations, the stock's current forward price-to-earnings (P/E) of 21 is attractive. Continued growth from this modest valuation could eventually force the share price higher, making Starbucks stock a rebound story waiting to happen.
Should you invest $1,000 in Altria Group right now?
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks and Uber Technologies. The Motley Fool has a disclosure policy.
