The equity markets have been a bit schizophrenic so far in 2014, with a big selloff in January followed by a huge gain in late February. That schizophrenic kickoff to the year also has caused turmoil in many otherwise stalwart, dependable dividend stocks.
In fact, some of the biggest, most-reliable companies that have paid dividends for decades have failed to hold their weight under the strain of the volatile 2014 trade.
To find out which of the dividend stocks has disappointed most this year, I did a quick sort through our outstanding InvestorPlace Dependable Dividends page to see which stocks were among the worst year-to-date under-performance relative to the rest of the stocks on this list of standouts.
Here are five lagging dependable dividend stocks not holding their weight.
Lagging Dependable Dividend Stocks #5: Chevron (CVX)
Dividend Yield: 3.5%
YTD Performance: -7.1%
Big Oil stalwart Chevron (CVX) has seen its share price tumble 7% this year. That’s a most atypical move for the normally stellar oil giant, especially when you consider CVX stock has nearly doubled over the past five years. So, why has the stock come under fire of late?
The simplest answer is earnings weakness. In fact, Chevron has experienced a sharp drop of 7% in revenue and a 31% decline in income in its most-recent quarter. It’s also facing metrics you don’t want to see in dependable dividend stocks, including increased costs and declining margins.
Now, before you go out and sell your CVX stock, keep in mind that Chevron remains a gargantuan profit machine with several very large projects in the works such as the Gorgon and Wheatstone natural gas development in Australia.
I suspect that in the long term, the recent decline in Chevron metrics and CVX stock will be a blip on their radar. Long-term investors may want to think about building a position in CVX, the first of our lagging dependable dividend stocks.
Lagging Dependable Dividend Stocks #4: AT&T (T)
Dividend Yield: 5.7%
YTD Performance: -8%
Telecom giant AT&T (T) has seen its shares slide 8% so far in 2014, and part of that slide has to do with growing competition with renegade wireless service provider T-Mobile (TMUS). AT&T just announced it was cutting its rates on its mobile data sharing plans, a move designed to thwart competition from the lower-cost data provided T-Mobile.
The price wars here might ultimately be a good thing for T stock, as the company has deep pockets they can use to run T-Mobile out of town. But in the short term, I expect to see T stock remain under pressure due to the lowered cost of plans.
In the long term, however, T stock is one of those dependable dividend stocks that is likely to keep delivering for years to come, and that means the recent selling might indeed be a great buying opportunity — specially when you’re getting a dividend yield of 5.7% to hold it.
Lagging Dependable Dividend Stocks #3: Franklin Resources (BEN)
Dividend Yield: 0.9%
YTD Performance: -9%
Franklin Resources (BEN) doesn’t have an especially high dividend yield, but it has a long history of paying out and raising payouts, which qualifies it as one of our dependable dividend stocks.
The political turmoil in Ukraine has largely been a non-event for the major equity indices, but that’s not the case for the investment services firm. BEN stock came under pressure on fears that it had a lot of sovereign debt exposure to the troubled region.
Analysts at UBS came out with a note to clients explaining that Franklin’s exposure to the region was essentially nothing, and that Franklin did not have exposure to the most troubled countries. UBS reiterated its “Buy” rating on BEN stock, and maintained its $62 price target on the shares.
This is a move I think BEN stock shareholders should take note of, especially of the Ukraine situation proves to be largely a non-event for markets.
Lagging Dependable Dividend Stocks #2: Cincinnati Financial (CINF)
Dividend Yield: 3.7%
YTD Performance: -9.5%
Wall Street hasn’t been very kind to property and casualty insurance firm Cincinnati Financial (CINF). The stock is down 9.5% in 2014, and that’s despite a strong quarterly earnings beat in the fourth quarter. Although the 79 cents per share that CINF earned in the quarter easily bested estimates for EPS of 69 cents, that number did represent a decline of 35% year over year.
But perhaps the bigger threat to CINF stock comes from mother nature. The horrendous winter storms and the damage they brought throughout much of the country are likely to put a big dent in the company’s bottom line in the coming quarter. The potential for such a loss caused Zacks to downgrade CINF stock to “Neutral” from “Outperform.”
I am with Zacks here, and even though I think CINF stock offers a nice dividend yield at 3.7%, I think a wait-and-see approach is a wise move before piling in.
Lagging Dependable Dividend Stocks #1: Chubb Corporation (CB)
Dividend Yield: 2.3%
YTD Performance: -10.5%
Much like its fellow insurer Cincinnati Financial, insurance holding company Chubb Corporation (CB) also is likely to come under fire from the tens of millions of dollars in estimated losses from the recent winter storms. And the hit it has taken so far lands it in the top spot on our list of lagging dependable dividend stocks.
The potential for said loss has caused CB stock to drop more than 10% year-to-date. Unlike CINF stock, which has a dividend yield of 3.7%, CINF stock offers a smaller, 2.3% dividend yield that makes its current situation a little concerning.
One thing CB stock has in its favor is strong growth, which can be seen in its most recent quarterly report, which showed a near five-fold surge in earnings year-over-year. That move was muted in by the company’s warning of pressured earnings from the latest storms. Even an announced $1.5 billion share buyback failed to lift the shares.
Here again, I’d be in wait-and-see mode for this insurer before nibbling on CB stock.
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As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.