Everyone’s looking for yield … but don’t chase it blindly. One of the biggest mistakes you can make is going after income chasing yield in unfavorable stocks. Stocks with poor fundamentals can fall in price to the point where the dividend yield appears quite compelling — 4% or even 5% or more — but don’t bite. The fundamentals of the company are still in decline, and the large institutional investors are dumping the stock. The added selling pressure can take the shares down by 20% or more, rendering the dividend payout insignificant.
Fortunately we have Portfolio Grader to help us identify those high-yielders with low potential that are better left untouched: Garmin (GRMN) - GPS devices are now built into our vehicles and even our smartphones, Cypress Semiconductor (CY) - sales and earnings have continued to decline as global semiconductor demand has weakened and NutriSystem (NTRI) - management is still warning of customer retention problems.
Source: InvestorPlace
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