10 Worst Dividend Stocks You Should Dump in 2017: Watch These Instead
Worst Dividend Stocks
There will be times where an investment is made and the results are not what are expected. The most unfortunate events would be when a total return is negative and when a stock ends up one of the worst dividend stocks of 2016.
Even with dividend-paying stocks, if the capital loss is large enough, it could offset the income that was earned. Thinking long-term, if the company is still is in trouble, there could be a dividend cut since, at the end of the day, there is still a reason why the stock price has fallen.
The worst dividend stocks of 2016 are such stocks and should be dumped by investors, who should instead find investments that are generating wealth. I have comprised a list below of worst dividend stocks of 2016.
Worst Dividend Stocks of 2016
|Symbol||Company Name||One-Year Performance||Dividend Yield|
|ANF||Abercrombie & Finch Co.||-55%||6.80%|
|TEVA||Teva Pharmaceutical Industries Ltd (ADR) ADR||-46%||4%|
|ERIC||Telefonaktiebolaget LM Ericsson||-36%||7.80%|
|HRB||H & R Block Inc||-28%||4.20%|
|LSI||Life Storage Inc||-26%||4.70%|
|CS||Credit Suisse Group AG (ADR)||-19%||4.60%|
|PBI||Pitney Bowes Inc.||-12%||4.60%|
|JE||Just Energy Group Inc||-11%||7%|
The first stock on the list is Abercrombie & Finch Co. (NYSE:ANF), which has a current dividend yield of 6.8%. After a first glance, any smart investor would think to take a more in-depth look at the company. Based on the stock chart, the company’s one-year performance is -55%. Even when calculating the total investment, it is still a near-50% negative return.
History shows that when losing money in an investment, it is harder to regain the capital over the long term. this is no different for the stocks above, with only the total returns being different.
Also the sectors these industries operate in and the strength of their corporate heads must be factored in as well. Abercrombie & Finch, Guess?, Inc. (NYSE:GES), and Macy’s Inc (NYSE:M) are all specialty retailers. The retail environment is seeing dramatic changes. Their share performance shows investors that these companies have not made the necessary changes to their business model, and investors have reacted by bidding the share price lower.
I have provided a list below of 10 stocks that should be considered worth owning in 2017. These are companies that reward their shareholders with dividends, special dividends, and returns via share repurchases. And not only that, but these businesses are also growing due to the sector they are in and thanks to smart management decisions. The share price performance does provide evidence of this.
Best Dividend Stocks to Watch in 2017
|Sr.No||Company Name||Symbol||One-Year Performance||Dividend Yield|
|1||Best Buy Co Inc||BBY||67%||2.50%|
|2||Boardwalk Pipeline Partners LP||BWP||61%||2.20%|
|3||Brookfield Infrastructure Partners L.P.||NYSE||o||4.42%|
|4||Enbridge Energy Partners L.P.||EEP||36%||8.97%|
|5||Select Income REIT||SIR||35%||7.90%|
|6||Magna International Inc.||MGA||28%||2.20%|
|8||Cedar Fair L.P.||FUN||21%||5.30%|
|10||Seagate Technology PLC||STX||14%||6.79%|
#1 Best Buy Co Inc
The one-year performance for BBY stock has been stellar and investors have taken notice of efforts to grow the business and reward shareholders.
Best Buy has operations in the retail environment and is adapting based on the move away from brick-and-mortar locations. The online side of the business now adds more to the bottom line, which is growing over 20% compared to sales numbers from the previous year. This is only one of the reasons why shareholders have bid the share price higher.
Best Buy is also is shareholder-friendly, as evidenced by the growing dividend payment. Since 2011, the dividend, which is reviewed each year in May, has nearly doubled.
A special dividend has also occurred; this is paid in addition to the regular dividend that shareholders receive. In 2015, a special dividend in the amount of $0.51 per share was paid, with another for $0.45 per share paid out in 2016.
Share repurchases have also occurred. In February of last year, Best Buy announced a $1.0-billion share repurchase program, which is planned to be completed within a two-year period. (Source: “Best Buy Announces Capital Return to Shareholders,” Best Buy Co Inc., February 25, 2016.)
Currently, BBY stock is trading at $43.95, which is offering investors a current dividend yield of 2.55%.
#2 Boardwalk Pipeline Partners LP
Boardwalk Pipeline Partners transports, stores, gathers, and processes natural gas and liquids for clients across the U.S. BWP stock is quite a unique investment opportunity, considering its financial statements.
Approximately 79% of revenue that was generated in 2015 was due to fees paid by customers to reserve pipeline space and storage assets. The reason companies are paying to reserve a spot on the pipeline is because the pipeline infrastructure already exists and oil and gas companies want to move their products as quickly as possible. And since it is unlikely that a new pipeline will be formed overnight, companies have no other choice. (Source: “Overview,” Boardwalk Pipeline Partners LP, last accessed January 16, 2017.)
Another reason for this trend is the rebound in the oil price, and as the price is trading, more demand is needed for the pipeline.
The company has not forgotten about its shareholders, with a dividend yield of 2.2% for BWP stock, based on the current price of $18.21.
#3 Brookfield Infrastructure Partners L.P.
Brookfield Infrastructure Partners is a very unique company with assets spread across the globe. Some of the market segments it operates are in are utilities, transportation, and energy.
When it comes to infrastructure spending, it is a great investment opportunity to consider. That’s because when governments look to grow their economies, infrastructure is one of the top priorities. This puts BIP stock in a prime position.
There’s also little worry that new companies would hurt Brookfield’s earnings, since it is quite difficult to enter this market segment. Global infrastructure companies require a lot of cash to start operations–a hurdle that Brookfield has obviously already overcome.
Income investors have been told to expect a dividend that will be growing at five to nine percent annually. Based on the dividend payment’s history, this rate appears to be consistent and accurate. (Source: “Overview,” Brookfield Infrastructure Partners L.P., last accessed January 13, 2017.)
#4 Enbridge Energy Partners L.P.
Enbridge operates in the energy sector, with a specialty in transporting oil via pipeline. EEP stock should be considered as an investment because the profits of the business are inflation-indexed.
The gross margins from operations are quite large because there are minimal costs outside of maintenance. As noted above, a large amount of capital is required to start a business in the pipeline sector. After the initial investment, however, maintenance is the only regular fee.
Given how great a business this is, it’s no surprise that shareholders have been rewarded. The dividend has seen an increase over the past seven years. A unique aspect of the dividend yield is that EEP stock would also be classified as a high-dividend stock. This is based on the dividend yield of 8.97%, with a current trading price of $25.98.
#5 Select Income REIT
This real estate investment trust (REIT) has 120 properties that are spread across the U.S.
A very important metric for REITs is the occupancy rate, because if a property is not generating income, it means that is it costing the company money to hold on to the property. The occupancy rate for Select Income is approximately 97%.
Another important factor to also consider before a REIT-based investment is made is the tenant base and how steady their businesses are. Select Income’s tenants make the REIT look more attractive, as they include the likes of Amazon.com, Inc. (NASDAQ:AMZN) and Bank of America Corp (NYSE:BAC). (Source: “Investor Presentation – November 2016,” Select Income REIT, November 2016.)
SIT stock has a high yield of 7.89%, based on the current market price of $25.86.
#6 Magna International Inc.
MGA is one of the largest suppliers of car parts in the world. This is great for investors because a global footprint adds to the diversification of the investment. Magna works with many different car companies, such as General Motors Company (NYSE:GM), Tesla Motors Inc (NASDAQ:TSLA) and Toyota Motor Corp (NYSE:TM). As these companies are successful, so is Magna, which doesn’t take the risk of producing the entire car.
With a diversified customer base, money has been returned to shareholders. Buybacks of outstanding shares are common, which benefits shareholders since fewer shares means the remaining ones are worth more.
Surplus cash has been used towards dividends as well. The current dividend that is paid to shareholders is $0.25; this has doubled since 2011.
The dividend yield for MGA stock is 2.22%, with a trading price of $45.09.
#7 Hershey Co.
HSY stock is one that could be considered as an investment to hold forever for a few reasons. The first would be the long history of the company, which has been operating around the world for over 120 years.
The second would be the business’ large margins. This adds to an investor’s certainty of how the future could look. This is quite important as well because it determines if HSY stock could continue to pay a dividend.
The third reason would be because of HSY stock’s growing dividend. Over the past 20 years, the dividend has seen growth of 476%. If the dividend can continue to grow can be determined by the payout ratio. This ratio is the percentage of earnings that are paid to shareholders in the form of a dividend. In the case of HSY stock, the payout ratio is 57%, meaning further dividend growth is possible.
#8 Cedar Fair L.P.
Even though Cedar Fair had a great past year, shares of FUN stock are still undervalued when compared to industry peers. This is going by the price-to-earnings (P/E) ratio. For Cedar Fair, the current ratio is 22.4 times, compared to the industry average of 47.0 times. The lower the ratio, the better it is from an investment perspective, because less is paid by investors.
Another reason that makes the investment appealing is the company’s management. Initially, the company’s goal was to hit $500.0 million in adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in 2018. However, Cedar Fair is currently on track to hit this goal in 2017. As a shareholder, this is what you want from a management team: under-promising and over-delivering. (Source: “Cedar Fair Reports Record Results Through The Third Quarter; Increases Quarterly Cash Distribution,” Cedar Fair L.P., November 2, 2016.)
When it comes to adding more to the pockets of shareholders, Cedar’s management is not shy to give investors more as profit increases. The proof has been in the growing dividend which gets reviewed annually in November.
#9 Hasbro Inc.
HAS stock had a great 2016 and continues to look good going forward. One of the reasons is because of Hasbro’s strategic partnership with Walt Disney Co (NYSE:DIS), creating products under Disney’s franchises, including Marvel Comics and Star Wars. Such partnerships represent a fifth of the company’s earnings as depicted in the improving operating margins over the past few years. (Source: “Investor Presentation,” Hasbro Inc., last accessed January 16, 2017.)
Another reason why the future looks bright for Hasbro is because of its global reach. The company is projecting double-digit growth over the next three years, based on current assets and the products pipelines expected from the aforementioned partnerships. (Source: Ibid.)
In 12 of the last 13 years, HAS stock’s dividend has seen an increase. The total increases over this period amount to 16%, compounded annually.
Share buybacks have also been used to benefit shareholders. Over the past 10 years, shares have been repurchased to reduce the number of shares outstanding. When shares are repurchased, it indicates a belief that the shares are undervalued from the company’s point of view. It also indicates that share repurchases were seen as the best way to use surplus capital.
#10 Seagate Technology PLC
STX stock has seen a rise over the last year because of smart business decisions. A major one was the reduction of costs across the board, specifically in areas that were not benefiting the bottom line as much as expected. This was accomplished by reducing the company headcount.This move has helped improved margins. A more hands-on approach has also been taken by corporate, with sales being converted to cash at a 40% faster pace. (Source: “Fiscal Q1 2017 Supplemental Financial Information,” Seagate Technology PLC, October 19, 2016.)
The returning of money to shareholders has not been forgotten during these changes. Two-thirds of earnings are paid via the dividend, which has increased 2,000% since 2003. The dividend is reviewed every October and, with the cushion of retaining earnings and shareholder payouts, there is the possibility of future dividend hikes.
STX stock is currently trading at $37.09, with a dividend yield of 6.79%.