Big Dividends to Avoid in 2013

Posted by D4L | Monday, December 17, 2012 | | 0 comments »

If you're an investor, there's no more direct route to sharing in the wealth of corporate profits than dividends. Owning a slice of a company earns you money on a regular basis. Not a bad deal, if you ask me. But it's not always as simple as that, and many a dividend investor can be lured into buying shares of companies that offer huge dividend yields. Two months ago, I warned investors that Midwestern grocery chain Roundy's (NYSE: RNDY) dividend looked too good to be true. At the time, it yielded 14.4%. The company has since cut it, and its stock price has fallen 25%.

Below, I'll share three more companies with big dividends that I'm not so certain about. You see, because of some funny accounting rules I won't get into here, the term "earnings" doesn't exactly represent how much money a company has brought in. Instead, we can look to free cash flow for a more realistic picture of how much money a company has brought in. Then, we can check to see how much of that money is being used to pay out dividends. Below are the three dividend companies I'll be avoiding in 2013, and the important metrics to be aware of: Windstream (Nasdaq: WIN), Vector Group (NYSE: VGR) and United Online (Nasdaq: UNTD).

Source: Motley Fool

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