Playing It Safe With Dividend Stocks? 4 High-Yielders to Avoid

What’s not to like about dividends? Income-seeking investors have flocked to them in recent years as interest rates have plunged. So have investors worried about an aging bull market and those seeking a buffer from volatility; they want to hunker down with dividend payers for the cushion they provide in downturns and for the way they seem to skirt the worst of the market’s mood swings.

In fact, says John Bailer, senior portfolio manager at The Boston Company Asset Management, you might consider some dividend payers wolves in sheep’s clothing. They pose hidden risks to your portfolio, particularly if you’re as interested in stock-price gains as you are in an income stream. Among the lurking dangers: Danger #1: Price Overpriced dividend stock to avoid: The Clorox Co. (CLX), Danger #2: Limited growth Low-growth dividend stock to avoid: This may surprise you, because Procter & Gamble (PG), Danger #3: Rate sensitivity Rate-sensitive stock to avoid: It’s hard to think of a more interest-rate-sensitive stock than Annaly Capital (NLY) and Danger #4: Fundamental hurdles Struggling dividend stock to avoid: GlaxoSmithKline (GSK).

Source: Kiplinger

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