Dividends4Life: 3 Dangerous Dividend Stocks

3 Dangerous Dividend Stocks

Posted by D4L | Thursday, December 25, 2014 | | 0 comments »

Yield. Danger ahead. You won't just see these warnings while on the road this holiday season -- they also relate to some dividend stocks. Investors can be enticed by high dividend yields, but sometimes the stocks themselves are dangerous picks. We asked three of our Motley Fool specialists to identify stocks that fit this category. Here are the stocks they think could have dangerous dividends.

Matt Frankel: One dividend stock that I'm a little nervous about right now is Prospect Capital (NASDAQ: PSEC). It's not even that I'm convinced the company won't have enough money to pay its dividend. It's the strange behavior coming from the company lately that worries me. Leo Sun: Frontier Communications (NASDAQ: FTR ) pays a forward annual dividend of 5.8% -- higher than AT&T's 5.2% and Verizon's 4.3%. However, Frontier slashed its quarterly dividend twice in the past -- from $0.25 to $0.1875 (after acquiring some of Verizon's landlines) in 2010, then from $0.1875 to $0.10 in 2012. Keith Speights: On the surface, PDL BioPharma (NASDAQ: PDLI ) looks like a great dividend stock. A stellar 7.6% forward annual dividend yield combined with a low 31% payout ratio might seem like an investor's dream. That dream could soon turn into a nightmare, though.

Source: Motley Fool

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