Whether you’re a conservative investor socking away funds for retirement or a seasoned day trader, solid dividend stocks always make a good portfolio stuffer. While most passive income-generating companies won’t make you rich, they can provide stability, especially in uncertain times. Plus, if we incur a downturn in the markets, dividend payers tend to lose less than their stingier counterparts.
However, dividend stocks represent a classic exchange. In return for the confidence and relative security of dividend payouts, the issuing companies usually don’t offer much capital upside. Of course, that’s not always the case: some dividend-bearing companies are high-risk, high-reward opportunities. Nevertheless, most of the popular income-generating equities are blue-chip titans: slow and steady.
But what happens if dividend stocks lose their core attribute? For many companies that have suffered enough fiscal pressure to warrant a dividend cut, the market impact can be devastating. Obviously, investors question the reasons that led to the painful decision. If they’re ugly enough, expect to see much red ink in the technical charts.
As we are only three months into the new decade, let’s take a look back at the ten worst dividend stocks of 2019. Although not the absolute worst, each of these names incurred a sharp cut in their payouts.
Furthermore, this list of dividend stocks is neither a recommendation to buy nor sell. Rather, it’s a historical reference for what can happen to a company if it decides to “stiff” its stakeholders. With this, I hope you’ll be able to better gauge the risk-reward profile of any dividend-bearing company you’re pursuing.
So with that, grab your popcorn and let’s go on a trip down memory lane!
Biggest Dividend Cut of 2010: BP (BP)
Even under the best of circumstances, many people regard big oil firms as a necessary evil. But in April of 2010, public sentiment was downright antagonistic against BP (NYSE:BP). As you’ll recall, the decade we’re about to bid farewell started off with one of the worst environmental disasters ever. A BP-managed oil rig exploded, contaminating the Gulf of Mexico.
Naturally, this sent BP stock tumbling. Also unsurprisingly, the oil company suspended dividends.
However, about a year after the disaster, BP was in the midst of its PR recovery campaign. Step number one was to restore its inclusion among dividend stocks. So, on February 2011, BP resumed payouts. But not to let BP stock off the hook so easily, Mark Wahlberg starred in a reenactment of the disaster.
Biggest Dividend Cut of 2011: Vulcan Materials (VMC)
Sometimes, dividend stocks suffer from a case of bad timing, aptly describing the situation with Vulcan Materials (NYSE:VMC). If VMC stock could incur the troubles that it did in 2011 a few years later, Donald J. Trump could have descended from the princely throne of Comcast’s (NASDAQ:CMCSA) NBC Studios and perhaps saved the day.
Unfortunately, Vulcan was struggling amid the fallout of the 2008 financial collapse and the ensuing Great Recession. Thus, late in 2011, management cut its dividend by a whopping 96% as part of broader cost-cutting initiatives.
However, VMC stock would bounce back big years later under the promises of making America great again.
Biggest Dividend Cut of 2012: KB Home (KBH)
The first — and so far only — time that I have been inside a Porsche 911 Turbo was when a friend gave me a joyride. His friend was a real estate agent in the crazy 2000s market. I think you know how this story goes.
If you don’t, you can take a quick look at the longer-term for KB Home (NYSE:KBH). An investment tethered to the homebuilding sector, KBH stock ripped to all-time highs in the middle of the last decade. But the smelly stuff eventually hit the fan, as did the aforementioned Porsche.
In 2012, KB Home made a series of passive income cuts, making it one of the worst dividend stocks of that year. Over time, KBH stock has moved incrementally higher. Still, it’s nowhere near its peak, providing some food for thought.
Biggest Dividend Cut of 2013: Schlumberger (SLB)
For dividend stocks, 2013 is certainly a year to forget. Simply put, many of the companies that delivered the ugliest payout cuts eventually fell off the map. However, Schlumberger (NYSE:SLB), the world’s largest oil services company, managed to survive. Of course, it wasn’t an easy ride for SLB stock.
Back then, the world was taking its first steps toward an economic recovery. However, 2013 was not kind to either energy- or commodities-related organizations. Due to significant fiscal pressures, Schlumberger temporarily cut its dividend. However, SLB stock didn’t tank until the following year, when the energy crisis began to weigh on the entire industry.
And just for the record, SLB stock doesn’t appear like its writing a feel-good story. Shares remain one of the most disappointing dividend stocks over the last several years.
Biggest Dividend Cut of 2014: Rhino Resource Partners (RHNO)
For many new investors, a tendency exists to misinterpret this phrase: be greedy when others are fearful and be fearful when others are greedy. Like anything in the markets – and especially with dividend stocks – there are no absolutely true rules. As with Rhino Resource Partners (OCTMKTS:RHNO) and RHNO stock, sometimes it’s good to go with the flow.
In 2014, Rhino Resource cut its dividend in a move that shocked no one. As an energy company focused on coal, RHNO stock was at the time losing relevancy. Despite President Trump’s administration, good fortune has failed to smile on the embattled organization.
So, let RHNO stock be a lesson: contrarian investing carries big risks. And to be perfectly honest, these speculative investments fail more often than they succeed.
Biggest Dividend Cut of 2015: Nexstar Media Group (NXST)
Probably one of the more unusual stories among dividend stocks, Nexstar Media Group (NASDAQ:NXST) has valiantly fought changing industry dynamics. Nexstar is the largest local television and media company in the U.S. As you might imagine with the streaming revolution, that doesn’t necessarily bode well for NXST stock.
After a strong market performance in 2013, NXST stock started to go flat. Facing some fiscal pressures along with changing consumer habits, Nexstar cut its dividend completely in August of 2015. To be fair, payouts resumed quickly thereafter.
Against intuitive expectations, NXST stock has moved higher since 2016. However, this is a name with which you should exercise caution until they can answer the streaming threat decisively.
Biggest Dividend Cut of 2016: Teekay (TK)
One of the largest shipowners in the world, Teekay (NYSE:TK) is another example of how bad timing can ruin everything. In the first half of 2014 when the energy crisis translated into oil price deflation, TK stock soared. Why? Lower prices boosted the oil trade, resulting in higher demand for Teekay’s services.
But from late 2014 into early 2016, TK stock plummeted. As oil prices recovered, they meant higher operating costs for energy transportation. More importantly, the inability to transport all available oil production caused severe supply chain efficiency headwinds.
To cope with the disastrous turn of events, Teekay cut its payout by 90% in 2016. Unfortunately, TK stock has continued to decline in the markets since then. Although it might appeal to contrarians, this is probably one of the dividend stocks to avoid.
Biggest Dividend Cut of 2017: General Electric (GE)
Industrial conglomerate General Electric (NYSE:GE) has been making headlines in recent years, but for all the wrong reasons. Primarily, GE stock was a convoluted investment prior to the new management team’s long-term recovery campaign.
In many ways, it still is. Among the many possibly insurmountable challenges that stymie GE stock is relevancy: it has few standout business units and several questionable ones. Worst of all, management must balance making painful cuts while maintaining some shot at growth.
Not surprisingly, General Electric slashed its dividends by half in 2017. That erased its status as historically one of the more generous dividend stocks. Moving forward, this is truly a gamble that the new leadership team will complete a Hail Mary pass.
Biggest Dividend Cut of 2018: Hi-Crush Partners (HCR)
If it seems like I’m picking on energy-related dividend stocks, I’m not doing it via personal bias. Statistically, this decade has not been kind to the sector. Yet another example is Hi-Crush Partners (NYSE:HCR) and HCR stock. A proppant and logistics services provider for the petroleum industry, Hi-Crush plays a vital role in our energy infrastructure.
Unfortunately for stakeholders, Wall Street didn’t give a flip. This was especially the case because Hi-Crush forwarded disappointing revenue figures. As a result, HCR stock was crushed during the last few months of 2018.
Not helping matters was that in October of that year, management cut its dividends. Today, investors can choose to speculate on the deflated HCR stock price. However, they’ll have to do so without the mitigating impact of passive income.
Biggest Dividend Cut of 2019: Nielsen (NLSN)
Most known for its TV ratings reports, Nielsen (NYSE:NLSN) is a contradiction. On one hand, Hollywood insiders base their content strategies in large part to Nielsen ratings. After all, if a show stinks, why bother making more episodes? But as an investment, NLSN stock simply does not deliver the goods.
Over the last few years, Nielsen’s revenue trajectory has been flat. Previously, this has prompted rumors that NLSN stock was a buyout target. It’s just that buyers want companies with potential. Financially, the research firm just doesn’t cut it.
In a bid to reinvigorate investor sentiment, Nielsen is now splitting into two separate publicly traded companies. Perhaps this will turn out to be good news. However, the move entails Nielsen sharply cutting its dividend.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.