Sell These 5 Popular Dividend Stocks About To Cut Yields

| April 5, 2016 | 0 Comments

sell buttonOperating in dying industries, selling outdated products, and facing stiff competition, these popular dividend paying stocks are in trouble. The second any of these five stocks announces a dividend cut expect its share price to crash. Sell these five dividend stocks today.

Dividends are undoubtedly great ways to juice the returns of your portfolio.

If you look at the S&P 500’s return over the last 10 years, it’s up 58%. Not too bad.

However, when you look at the total return, which includes dividends, it’s up 95%. That’s the difference of $370,000 on a million-dollar portfolio. But, imagine if you had weeded out the questionable dividend paying stocks beforehand.

Unlike what most of the media would have you believe, not all dividends are created equal. Still, investors find themselves reaching for yield as the S&P 500 average dividend clocks in at just 1.9%.

A high dividend yield, or even a multi-decade streak of dividend increases, doesn’t ensure the stock price will go up over time. Many dividend greats go through years of declines.

With that in mind, there are a number of large-cap stocks and well-known dividend payers that are likely in your portfolio but should be sold immediately. Here are the top 5 dividend stocks to sell today:

No. 1 Dividend To Sell Today: Kellogg Company (NYSE: K)

Kellogg CompanyKellogg is a household name and offers a 2.6% dividend yield. However, the rapid change in how we eat breakfast is soon to catch up to Kellogg. Unlike some breakfast foods companies, Kellogg has failed to embrace change. The rise of Greek yogurt and healthier breakfast bars continues to eat away at the cereal industry’s proverbial place at the table.

Kellogg’s own initiative to cater to the healthy and organic market hasn’t played out as expected, with its Kashi brand sales declining over the last couple years. Ultimately, Kellogg is losing its pricing power across all its products including snacks, frozen foods, and cereals.

Its profit margin, which has fallen below 5%, is now at multi-decade lows. Kellogg also trades at a rather rich valuation at close to 20 times next year’s earnings estimates.

No. 2 Dividend To Sell Today: AT&T (NYSE: T)

AT&TDon’t let the near 5% dividend yield fool you, AT&T relies heavily on phone services that are facing more and more competition. AT&T also relies heavily on Apple (NASDAQ: AAPL) iPhone sales, making the potential slowdown in iPhone sales troublesome for AT&T.

T-Mobile (NASDAQ: TMUS) is going directly after AT&T and its customers with competitive pricing, particularly on the data plan side which is where explosive growth is projected. As well, the DirecTV buyout will likely prove less fruitful than expected. There’s a real shift away from satellite, with cable companies still being able to offer better deals on both television and Internet services.


No. 3 Dividend To Sell Today: Altria Group (NYSE: MO)

Altria GroupIt’s been said for a long time that tobacco companies are a dying breed and that may finally be coming true. After years of outperformance and hefty dividend yields, the ever-spreading shaming and negativity surrounding the tobacco industry is a heavy shroud weighing on the sector.

However, there could be somegood years left for emerging markets, where tobacco use is still growing. But for countries like the U.S., the best times are in the past. Altria generates all its sales from the U.S. and has no international exposure. The 3.6% dividend yield it offers represents a nearly 75% payout of its earnings. With little opportunities for growth, that number will not be sustainable for much longer.

More headwinds for Altria are that U.S. cigarette volume is expected to fall by nearly 4% annually over the next 10 years. This news comes as the Food and Drug Administration continues to put more restrictions on the industry. Altria has been a laggard when it comes to innovating, being late to the e-cigarette market.

Related: New report  reveals how to safely earn 16% returns in 2016.

No. 4 Dividend To Sell Today: Kimberly-Clark (NYSE: KMB)

Kimberly-ClarkKimberly-Clark, offering a 2.7% dividend yield, might be a tough name to see on this list as it has a streak of 43 consecutive years of dividend increases. However, not even a streak of such dividend increases can protect the company from rising competition. Kimberly-Clark’s key products include the likes of Huggies, Kotex, and Kleenex, which are seeing increased competition from big names like Procter & Gamble (NYSE: PG).

For starters, P&G has decided to get back into the adult incontinence market, taking aim at Kimberly-Clark’s leading market share position. P&G has also gotten aggressive with its marketing and recently overtook Kimberly-Clark in the diaper market with its Pampers brand.

Trading at over 20 times forward earnings makes Kimberly-Clark a questionable dividend stock in a market where competition is on the rise.

No. 5 Dividend To Sell Today: General Mills (NYSE: GIS)

General MillsThis is the second cereal stock to make our list, and for good reason, nobody eats cereal anymore. General Mills is the market leader in cereals, owning 30% of the U.S. market share.

For General Mills, offering a 2.9% dividend yield, it’s not just about the rising competition for cereal, but also frozen foods. Consumers are opting for fresher (farmer’s market type) options. In that vein, General Mills took a loss on its frozen vegetables business by selling it off. Trading at 20 times forward earnings, there’s only so much they can do in terms of selling off underperforming businesses. There’s more underperformance in store for General Mills.

In the end, dividend experts always tell you to go after the steady dividends, but they won’t tell you that sometimes stock price declines grossly outweigh any dividend they pay. Don’t find yourself sacrificing stock price growth just to get a seemingly solid dividend.

Finding stable companies that regularly increase their dividends is the strategy that my colleague Tim Plaehn uses to produce superior results, no matter if the market moves up or down in the shorter term.

The combination of a high yield and regular dividend growth is what has given him the most consistent gains out of any strategy that he has tried over his decades-long investing career.

The system he uses is called Accelerating Dividends and with it you can double your money in as little as four and a half years using safe dividend stocks just like he does.

You probably already know there are about 3,000 U.S. stocks that pay dividends, with some yielding 12%+ per year.

But it’s not the size of the dividend that counts, it’s whether those dividends are sustainable and rise over time, like the ones mentioned above.

Rising dividends propel share price returns and rapidly increases the cash income you earn on your investments. And, not only are companies with Accelerating Dividends more profitable than dividend stocks that don’t increase their payouts, they are safer too.

If you do not own any stocks with Accelerating Dividends or this is the first time you have heard of this powerful class of stocks, I urge you to read the new report that Tim just released.

The new investor briefing reveals the simple to use strategy behind Accelerating Dividends and shows you how to identify stocks that pay sustainable dividends with a track record of increasing frequently – no matter what the market does.

Click here to find out more about this new system for increasing your income every year, every quarter, even every month.


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About the Author ()

Marshall Hargrave is the managing partner of Bridgewater Investments LLC, a boutique equity research company. Bridgewater provides specialized research for deep value securities and certain special situations. Marshall brings a unique perspective, with background as a tech startup CEO and as a financial advisor with Northwestern Mutual Financial Network. He has also helped co-found several startups in the finance space.