Investors are scrambling for income now that savings rates have evaporated; just be careful where you look for it. Some dividends aren’t what they appear.
Back in the late 1990s when the dotcom boom was in full bull
mode, a common refrain among brokers asserted “growth is the new income.”
These days, you could say that income is the new income.
People are looking for growth and income for either some security over the long
term — rather than pure growth stocks — or, they’re looking to move some cash
out of bank accounts and CDs that barely have yields at this point.
Either way, there are some solid dividend paying stocks out
there; I’m finding plenty of exciting contenders for my Growth Investor Buy
List. But these are not those stocks.
These are stocks that face significant fights to stay afloat
in some cases and to save their dividends in others. The outbreak of novel
coronavirus has many companies stuck between their shareholders and a hard
place.
“Research shows that dividend cuts are associated with
significant share price declines on announcement,” Cornell University Professor
of Finance and Harold Bierman Jr. Distinguished Professor of Management Andrew
Karolyi told InvestorPlace in an email. “Since dividends provide important
signals about future earnings prospects (cuts imply uncertainty), they are
often delayed, and are interpreted as a last resort action.”
Dean Karolyi went on to say that the sectors most likely to
see dividend cuts are those that have high yields and relatively high fractions
of dividend-payers, compounded with “uncertainty about future earnings during
the COVID crisis.”
With that in mind, here are 7 dividend stocks that could be
in danger:
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