by Jim Woods | December 18, 2013 2:02 pm
It has been a very good year for the equity markets, and dividend stocks have been no exception.
Although the year-to-date performance of the S&P 500 Index at nearly 25% has surpassed the year-to-date performance of the benchmark dividend ETF, the iShares Select Dividend Index (DVY, +21.8%), many stalwart dividend plays have been putting smiles on income-oriented investors’ faces.
Unfortunately, this story isn’t about smiling faces.
This is about the dark side of the dividend story — particularly companies that laid a serious egg in 2013. By laying an egg, I mean these dividend stocks either suspended or severely slashed their payouts this year. That means if you bought these companies thinking you’d get income, sorry … you’re out of luck.
Here are five (and then some) dividend stocks that turned into big disappointments in 2013.
Trimming off the pounds is what Weight Watchers (WTW) products are designed to do. But in October, WTW cut the fat on its income stream, suspending its payment and citing the struggle to recruit new members as the reason for the dividend diet.
WTW stock plunged more than 20% in one session on the news — the biggest drop since the company went public in November 2001.
Weight Watchers hopes to use the estimated $39 million they will save on dividend payments to fund growth initiatives, and while I wish the company success, I recommend investors dump the diet plan and gorge on these 5 Sure-Fire Dividend Stocks to Buy instead.
Finnish mobile phone manufacturer Nokia (NOK) hung up on income investors in January, with the company dumping its dividend for the first time in more than two decades.
Nokia did manage to have a good year in terms of profits in 2013, and NOK stock has also performed very well, jumping more than 90% this year.
However, Nokia isn’t the same company anymore, having dumped its handset business onto Microsoft (MSFT). And again, it’s no longer a dividend play.
If you’re looking for an income-producing dividend stock to fill the void, consider the classic pure plays AT&T (T) and Verizon (VZ).
When it comes to suspending dividends, the Europeans don’t want to be left out. In October, Spain’s biggest financial institution, Banco Bilbao Vizcaya Argentaria (BBVA), cut its annual dividend by putting a cap on payouts for 2014 (and going forward) to 40% of profits.
Tough conditions in Spain’s economy, and a pending Europe-wide asset review by the European Central Bank slated for next year, has caused BBVA to tighten its belt and keep as much cash on the balance sheet as it can. Unfortunately, that’s at the expense of shareholders in country’s premier bank.
While the company still plans to dole out dividends, it is altering 2013 payments that were slated to be paid out next year. For one, the cash payment due in January was cancelled. Also, BBVA said it would increase the dividend payout due in April to help compensate for the January suspension, but in the end, BBVA stock will end up cutting its total payouts from 2013 from 0.42 euros to 0.37 euros.
What do you do when you’re essentially a print-oriented company trapped in a digital world?
If you’re Pitney Bowes (PBI), you sacrifice shareholders by taking the knife to your dividend.
In late April, PBI cut its payout in half as the mail-and-document-services giant continued to struggle. Declining revenue and weaker demand for mail products meant shareholders were presented with a payout of 18.75 cents per share vs. the 37.5 cents that was delivered to their financial mailboxes before the April cut.
Including the initial dip following the company’s announcement, PBI stock actually is up more than 30% since hacking away at its dividend. Nonetheless, I suspect the digital writing is on the wall here for Pitney Bowes. As such, if you still own PBI stock for the dividend, you might want to mark it “return to sender.”
The final entries among the disappointing dividend stocks of 2013 all came from the gold mining sector, and as such, I didn’t want to pick on just one.
Given that 2013 was the first down year for gold in a very long time, it should come as no surprise that gold mining stocks suffered in sympathy. That suffering caused the biggest gold producer, Barrick Gold (ABX), to cut its payout, which it announced on Aug. 1. ABX also took a writedown in the previous quarter, citing slumping bullion prices.
A day earlier, Kinross Gold (KGC) suspended its semiannual dividend, and it also announced a delay in its decision on future expansion of the mill at the Tasiast mine in Africa. Finally, about a week later, AngloGold Ashanti (AU) — the third-largest producer of the yellow metal — suspended its dividend on poor earnings due to declining gold prices.
With the luster now off on gold, the dividend income from mining stocks also is dead. I say scrap this dividend sector in 2014 until the shine returns.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.
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