There are several rules of thumb when it comes to picking out the best investments for retirees. Dividend stocks are popular investments for retirees because of the power of dividend compounding over time. In addition, dividend stocks are typically blue-chip companies with solid cash flows and long track records of strong performance.
It’s certainly not bad advice to recommend a retiree buy stocks in companies with recognizable brands and high dividend yields.
Unfortunately, there are exceptions to every rule of thumb, and dividends aren’t necessarily guaranteed. Potash Corporation of Saskatchewan (USA) (NYSE:POT), Noble Corporation Ordinary Shares (UK) (NYSE:NE) and Kinder Morgan Inc (NYSE: KMI) are just three examples of recognizable companies that have cut their dividends recently.
Not only have investors been denied the dividend yield they thought they were getting, but stocks in danger of dividend cuts tend to underperform in the market as well.
Retirees should look deeper than a stock’s dividend yield before investing for the long-term. With that in mind, here’s a look at three recognizable dividend stocks retirees should avoid at all costs.