Dividend Stocks

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>>> These 13 Tempting Dividend Stocks Torched Investors


Investors Business Daily

MATT KRANTZ

01/17/2020


https://www.investors.com/etfs-and-funds/sectors/sp500-these-13-tempting-dividend-stocks-torched-yield-chasers/


Savvy investors know chasing dividend yield is dangerous. And those that tried it anyway with some S&P 500 stocks learned why not to — the hard way — yet again.

Owners of 13 high-dividend stocks going into 2019, including consumer discretionary stocks Macy's (M) and Gap (GPS), and energy stock Occidental Petroleum (OXY), wound up with net losses of 10% or more during the year. This is according to an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

Investors wound up losing money despite each of these stocks yielding 3% at the start of 2019 — because the stocks themselves plummeted. The SPDR S&P 500 ETF Trust (SPY), in comparison, started 2019 yielding just 2.01% (it's down to 1.7% now).

Losing money especially stung in 2019, when the S&P 500 rose nearly 29%. It especially hurt when you thought your dividends were money in the bank.

In fact, 413 stocks in the S&P 500 paid a dividend going into 2019, says S&P Global Market Intelligence. Of those dividend-paying stocks, 38, or 9%, saw their shares fall enough during the year to wipe out the entire year's dividend yield, or worse. And that's in a good market. Nearly two-thirds of dividend stocks dropped by more than their yield during 2018's more challenging market.

If you're looking for yield, it's much better to use IBD's strategy of finding high-yield stocks you can count on.


SPDR Sector ETFs:

Real Estate XLRE
Utilities XLU
Communication Services XLC
Information Technology XLK
Consumer Staples XLP
Health Care XLV
Industrials XLI
Consumer Discretionary XLY
Materials XLB
Financials XLF
Energy XLE


S&P 500 dividend payments are rising and expected to jump again this year.

Last year, S&P 500 companies paid a record $485 billion in dividends. And if forecasters are right, the dividend payment is likely to surpass half-a-trillion dollars in 2020.

And right now, the sector paying the highest yield is the Energy Select Sector SPDR ETF (XLE) at 3.3%. But even the sector itself shows the danger of chasing yield. Shares of the energy ETF are down 4% over the past 12 months, exceeding the current dividend yield.

Dividends for the Communication Service Select SPDR ETF (XLC) yield just 0.8%, the lowest of the 11 S&P 500 sectors. But you won't see many investors complaining, as the ETF's price is up nearly 27% the past 12 months.

Chasing yield, though, burns even more with individual stocks.

Macy's: An S&P 500 Warning Of Chasing Yield

Want an example in the S&P 500 of how a big dividend alone won't save you from losses? Look no further than Macy's.

The department store waved a juicy 5.07% yield in front of investors starting in 2019. But investors who took the dividend wager suffered mightily. Shares of the company fell nearly 43% in 2019. Macy's reported adjusted losses in three out of the four quarters of 2019. You wound up losing your dividend and then some.

Following Macy's stock price fall, the dividend is now up to 8.7%. But who will fall for it again? Analysts already think Macy's adjusted earnings per share will tumble 35% in fiscal 2020. And revenue is seen falling 1% to $24.7 billion. The 9 IBD Composite Rating, of a best-possible 99, alone should scare you off.

Drilling Down On Dangerous Energy Dividends

If you need a reminder why to not chase energy dividends, look deeper. Take Occidental Petroleum. The company started 2019 off yielding 5.1%. But that was a siren's song. Shares of the S&P 500 —energy firm ended up dropping nearly 33% in 2019.

The energy company's adjusted earnings per share is expected to fall 63% in 2019 and another 39% in 2020. That's definitely a risk for anyone thinking about chasing the dividend yield, now up to 6.7%.

Again, these painful reminders just show why growth stocks, even with no or low dividends, are often a better bet.

S&P 500 Companies That Torched Dividend Yields In 2019 By Net Loss

Company Ticker Dividend yield on Jan. 1, 2019 2019 % ch. Sector Net loss Yield now Composite Rating


Macy's (M) 5.07% -42.9% Consumer Discretionary -37.8% 8.7% 9

Occidental Petroleum (OXY) 5.08% -32.9% Energy -27.8% 6.7% 24

The Gap (GPS) 3.77% -31.4% Consumer Discretionary -27.6% 5.4% 24

L Brands (LB) 9.35% -29.4% Consumer Discretionary -20.1% 6.1% 21

Kraft Heinz (KHC) 5.81% -25.3% Consumer Staples -19.5% 5.1% 38

Kohl's (KSS) 3.68% -23.2% Consumer Discretionary -19.5% 5.7% 11

Tapestry (TPR) 4.00% -20.1% Consumer Discretionary -16.1% 4.7% 36

Nordstrom (JWN) 3.18% -12.2% Consumer Discretionary -9.0% 3.7% 46

Franklin Resources (BEN) 3.51% -12.4% Financials -8.9% 4.3% 18

Nielsen Holdings (NLSN) 6.00% -13.0% Industrials -7.0% 1.1% 30

Pfizer (PFE) 3.30% -10.2% Health Care -6.9% 3.7% 61

Simon Property Group (SPG) 4.76% -11.3% Real Estate -6.6% 5.7% 32

H&R Block (HRB) 3.94% -7.4% Consumer Discretionary -3.5%
4.2% 33

SPDR S&P 500 ETF Trust (SPY) 2.01% 28.8% 30.8% 1.7%

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