3 Dividend Stocks That Are Just Doomed


  • Avoid or sell these three dividend stocks before they plummet.
  • Anglo American Platinum (OTCMKTS:ANGPY): Another disappointing production report has countered any dividend benefits.
  • CTO Realty Growth (NYSE:CTO): A cyclical portfolio means the yield curve’s positioning and rising credit spreads may lead to diminishing value.
  • British American Tobacco (NYSE:BTI): The diminishing popularity of tobacco products is bad news for BTI stock long-term.
dividend stocks to sell - 3 Dividend Stocks That Are Just Doomed

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Numerous high-quality dividend opportunities are up for grabs at the moment, which may be appealing to some investors given the uncertainty embedded in today’s market environment. Furthermore, many investors might fancy dividend stocks in the current market climate due to the lackluster performance of fixed-income securities. And, typically it is better to hold onto dividend stocks long term and never think of them as ones to sell.

Although I agree with such a mindset, there are currently various risks attached to certain high dividend payers. For one, nominal earnings in the U.S. are receding, leaving less scope for payout ratios to increase. In addition, some stocks simply possess too much price risk, meaning their illustrious dividend profiles account for little.

Here are three dividend stocks to sell that I believe could feel the pinch in the coming quarters.

Anglo American Platinum (ANGPY)

A pile of platinum rocks.
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Anglo American Platinum (OTCMKTS:ANGPY), otherwise known as Amplats, is having a torrid time. The firm’s stock has lost more than 60% of its value since the start of the year amid a series of disappointments, and matters seem to be getting worse.

Amplats released its third-quarter production results last week. According to the firm, regional infrastructure problems in South Africa led to a 2% decrease in quarterly platinum group metals (PGM) production. Moreover, Anglo American Platinum’s refined output nosedived by 9% as an unexpected municipal water shutdown impacted proceedings.

Even though Amplats is the world’s largest PGM miner by value, it faces an uphill battle. I base my claim on there being few catalysts to spark a recovery of PGM prices. In addition, the firm might struggle to ramp up to its full potential for the foreseeable future amid South Africa’s decaying public infrastructure.

In my opinion, the stock’s 7.64% dividend could be no more in a year’s time.

CTO Realty Growth (CTO)

Large supermarket in a shopping center abandoned and boarded up
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Many might question CTO Realty Growth’s (NYSE:CTO) inclusion in today’s list. However, there’s a method behind the madness.

CTO Realty Growth owns 4.2 million square feet of retail and mixed-use real estate partitioned into 24 properties. Furthermore, the REIT’s portfolio has an implied capitalization rate of 8%, stemming from its solid 91% occupancy and long-term lease agreements. Sounds good, right?

Not quite. You see, the U.S. treasury yield curve is at its highest level since 2007. Moreover, option-adjusted spreads have surged by nearly 17% since September 20, while inflation has halved year-on-year. As such, significant pressure is being put on cyclical REITs such as CTO.

Furthermore, CTO Realty has a $39 million investment in Alpine Income Property Trust (NYSE:PINE), which adds additional challenges as Alpine missed its funds from operations per share target by two cents earlier this month. Although Alpine plays a minor role in CTO REIT’s income mix, its underperformance is a risk factor nonetheless.

In essence, my argument is that CTO REIT is doomed for the time being. I don’t believe it is a bad asset overall. I just think that it has a lot going against it at the moment, phasing out the benefits of its 9.66% dividend yield.

British American Tobacco (BTI)

image of hands holding handful of processed tobacco
Source: Shutterstock

British American Tobacco (NYSE:BTI) doesn’t look like it belongs on a list of dividend stocks to sell at first glance. It is a consumer staples stock with a dividend yield of 9.39%, meaning it is theoretically a fixed-income proxy. However, a deeper consideration suggests that BTI stock may be a value trap.

The company faces a slowdown in the tobacco end market, which could lead to diminishing profitability. More specifically, the tobacco market is forecast to grow at only 2.1% annually until 2030. Although British American Tobacco has pivoted into non-combustible products for renewed growth, it remains to be seen whether the market is sustainable.

Furthermore, British American Tobacco is an ESG risk. Even though many investors may not care about ESG, institutional investment mandates generally enforce the concept. Thus, British American Tobacco is at risk of losing support from institutional investors, which could lead to headwinds for its stock.

BTI stock’s P/E ratio of 6.3x seems compelling. Nevertheless, its 5-year forecast PEG ratio of 2.97x suggests BTI stock is a value trap, substantiating my concerns about the firm’s fundamentals.

On the date of publication, Steve Booyens 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.

Steve Booyens co-founded Pearl Gray Equity and Research in 2020 and has been responsible for institutional equity research and PR ever since. Before founding the firm, Steve spent time working in various finance roles in London and South Africa. He holds an MSc in Investment Banking from Queen Mary – University of London. Furthermore, Steve has passed all CFA Levels and is working toward his Ph.D. in Finance. His articles are published on various reputable web pages such as Seeking Alpha, TipRanks, Yahoo Finance, and Benzinga. Steve’s articles on InvestorPlace form an interesting juxtaposition between mainstream opinion and objective theory. Readers can expect coverage on frequently traded stocks, REITs, fixed-income funds, CEFs, and ETFs.

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