Dividends4Life: Stocks With Dividends in Danger

Stocks With Dividends in Danger

Posted by D4L | Friday, April 29, 2011 | | 0 comments »

To review: dividend payout ratio = dividends per share / earnings per share. When dividends per share are greater than earnings per share, the payout ratio is greater than 100%. When this happens, it suggests that these companies are not earning a sufficient amount to finance future dividend payments. And, of course, if the company’s intent is to pay out dividends in excess of earnings by raiding retained capital, shareholders’ equity stake in the company will be diluted. Diluting shareholders’ equity in a company in order to pay them more dividends sounds rather like cutting off one’s nose to spite

The following 16 companies have dividend payout ratios in excess of 100%. In short, these companies’ stocks look ripe for a fall and their dividend payments are unsustainable. What do you think the market knows about these companies that have kept their share prices propped up thus far?

Source: Wall St Cheat Sheet

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