3 Dividend Stocks to Sell Before They Get Sued by Customers

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  • Companies getting sued by their customers or shareholders are the dividend stocks to avoid.
  • 3M (MMM): Military personnel have an earplug lawsuit that could take years to resolve.
  • Johnson & Johnson (JNJ): A talc settlement costs billions and is not a positive catalyst for this expensively valued firm.
  • Medical Properties Trust (MPW): Lawyers are suing the company on behalf of shareholders while MPT sues a short-seller for damages.
Dividend Stocks to Avoid - 3 Dividend Stocks to Sell Before They Get Sued by Customers

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Companies getting sued by their customers are the dividend stocks to avoid. These are serious lawsuits that also provide unnecessary distractions.

So if you want to save yourself time and money, take a look at these three companies below. All are facing customer lawsuits and are dividend stocks to sell now.

MMM 3M $106.78
JNJ Johnson & Johnson $165.67
MPW Medical Properties Trust $8.53

3M (MMM)

3M logo on top of a corporate building. MMM stock
Source: JPstock / Shutterstock.com

3M (NYSE:MMM) is stuck fighting in court in a growing battle regarding its earplugs. More than 200,000 military service members blame 3M for its ear plugs not working.

Aearo Technologies made the product. Then, 3M acquired the company in 2008. Since 2018, 3M has been involved in ongoing legal battles over these ear plugs.

At a global industrials conference, 3M said the earnings guidance for 2023 excludes the potential cost of litigation related to the earplugs. It issued EPS guidance of $8.50 to $9.50.

The company is also defending itself over the use of toxic substances. This includes perfluoroalkyl and poly-fluoroalkyl substances. California wants to recoup cleanup costs related to those “forever chemicals.”

Johnson & Johnson (JNJ)

A red Johnson & Johnson (JNJ) sign hangs inside in Moscow, Russia.
Source: Alexander Tolstykh / Shutterstock.com

Johnson & Johnson (NYSE:JNJ) rallied from around $150 to over $165 when it refiled for bankruptcy for LTL Management. It established LTL to hold and manage the legal claims related to cosmetic talc.

On April 4, 2023, J&J re-filed for voluntary Ch. 11 bankruptcy protection for LTL. J&J said that the reorganization would resolve all claims, after agreeing to contribute up to $8.9 billion.

This amount is payable over 25 years. The amount will cover all current and future talc claims with $6.9 billion. This is $2 billion above the previous commitment amount.

Stock markets bid JNJ stock higher after the news. However, this is one of the dividend stocks to avoid because the settlement is not a positive development. The market likes the removed uncertainty.

However, the stock pays a dividend that yields just 2.73%. In addition, the price-to-earnings ratio is nearly 25 times.

Investors should buy other drug manufacturers with lower litigation costs and whose stocks pay a higher dividend yield.

Medical Properties Trust (MPW)

Blurred hospital images, Patient bed in the hospital, Hospital cleaning, Hospital disinfection cleaning, Patient bed cleaning for emergency patients. Medical Properties Trust (MPW)
Source: venusvi / Shutterstock.com

Medical Properties Trust (NYSE:MPW) is a real estate investment trust. It faces shareholder class-action lawsuits.

Last month, Medical Properties sued a short-seller, Viceroy Research, and its members. Its claims include permanent injunctive relief and punitive damages on the grounds of “defamation, civil conspiracy, tortious interference, private nuisance, and unjust enrichment.”

The bears have a sound bet against MPW stock. The short float is 19.28% of shares. In the last decade, shares traded in a range of around $10 to $16. During the pandemic, investors bet that healthcare facilities would thrive. The stock peaked at around $24. More recently, the stock traded as low as $7.10 before rebounding slightly.

MPT sold its Healthscope portfolio for 1.2 billion Australian dollars. It will use the cash proceeds to pay back a loan that matures in 2024. Risks are increasing that the company’s net asset value could decline compared to its stock price. Bears are confident that the company will need to sell assets at a discount to cover its debt.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.


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