If you hold dividend stocks today, you’re facing a particularly high risk of a dividend cut. That’s based on the latest numbers from FactSet, which show that 42 S&P 500 companies had payout ratios above 100% as of the end of the second quarter—so they’re paying out more in dividends than they’re earning. Worse, this is the third-highest total in a decade. And yes, it’s also true that not all of these companies will be forced to reduce their dividends. Some will find ways to juice their earnings, either by growing sales, cutting costs, or a combination of the two.
But more and more are going the dividend-cut route. In Q2, for example, 158 US stocks slashed their payouts—up 86% from a year ago! That makes looking beyond dividend yield, at factors like payout ratios, earnings, cash flow and balance-sheet strength more important than ever. If that sounds like work, don’t worry. I’ve done it for you and have come up with four stocks with particularly wobbly payouts you need to avoid at all costs—or sell them if you already own them: Frontier Communications (FTR), Caterpillar (CAT), The Mosaic Co. (MOS) and Mattel (MAT).
Source: Forbes
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