When High Dividend Stocks Melt Down

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Dividend Stocks Research
When High Dividend Stocks Melt Down
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• Hi, My name is Aaron and Im with Dividend Stocks
  Research, today were reviewing our recently
  published article

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• When High Dividend Stocks Melt Down

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• Years ago a friend of mine leased a gray Lincoln
  Town Car. That was back when a Lincoln was the
  size of a small studio apartment. A few months
  into the deal, he stopped making payments and I
  couldnt figure out why.

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• He had a good job. Money didnt seem to be an
  issue. He was smart and perfectly aware of the
  inevitable consequences. Before long, curiosity
  got the better of me and I asked him why.

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• I want to see how long I can get away with it,
  he said. He loved dodging repo men,
  outmaneuvering menacing tow trucks, and
  sidestepping phone calls. He managed to get away
  with it for quite awhile, maybe 7 or 8 months.

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• But eventually the caper was up. Thanks to the
  diligence of Ford Motor Credits henchmen, the
  big gray Lincoln Town Car vanished in the night.
  The same thing happens when you chase a high
  yield dividend stock.

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• All youre doing is delaying the inevitable. High
  dividend stocks have an annoying habit of turning
  into low dividend stocks, and vanishing like my
  friends Lincoln Town Car.

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• How To Avoid The Meltdown Of High Dividend Stocks

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• When you chase after high yield, and high yield
  is your 1 consideration, youve set yourself for
  a rendezvous with heartbreak. My associate
  Michael Jennings says high yield stocks are home
  wreckers.

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• I couldnt agree more. Whats the alternative to
  chasing high yield? Do you really have to settle
  for a yield thats low? Not when you focus on
  finding dividend stocks where theres dividend
  growth.

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• And dividend growth happens when earnings per
  share are growing.

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• The Road Ahead For Dividend Stocks

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• We should always take market forecasts with a
  grain of salt. But it sure was interesting a few
  months ago when Goldman Sachs released a forecast
  that predicted over the next decade, 46 of

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• the markets overall returns will come from
  dividends. Thats not exactly a huge historic
  shift. Since 1926, dividends have delivered 40
  of the stock market's annualized total return.

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• But the report from Goldman Sachs is a great
  reminder of the impact of dividends and the
  importance of dividend growth.

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• The Best Dividend Stocks To Own

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• The way to find the best dividend stocks to own
  is to focus on growth. Go beyond thinking in
  terms of pure growth stocks, where the share
  price soars, but where the dividend itself grows.

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• You can measure this by looking at the dividends
  paid year-to-year. See how they grow. Find
  solid track records that are likely to continue.
  Whats a good growth rate?

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• For stocks on the SP 500, the current dividend
  growth rate is 11.67. Thats high... more than
  twice as high as the long-term average.

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• This double-digit growth is a pretty good
  indication that we could soon see a slowdown.
  This kind of growth is hard to sustain over the
  long haul.

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• The dividend stocks that can weather this storm
  and continue to grow are stocks where revenues
  will grow. Were looking for companies where
  there will be higher earnings per share, not just
  growth in income.

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• What kind of companies?
• The ones that gut it out in good times and bad.
  You can find many of them on the lineup of the
  SP 500 Dividend Aristocrats.

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• And the high yield stocks to avoid? Here are 3
  stocks ready for the dividend repo man to come
  around. Dont count on the yield you see today
  being there for you a year from now.

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• Navios Maritime Partners LP NMM pays a yield of
  20.87. The stock has taken a brutal hit over
  the past year because of problems in China.
  Navios is in the business of shipping, its used
  to

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• shipping a lot of Chinese steel, and theres
  simply not much steel to ship these days. So the
  revenue problem with Navios probably wont be
  fixed anytime soon.

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• Even though the dividend has been growing for 7
  years, the dividend payout ratio is downright
  scary... 295. (One thing youve got to love
  about Navios is its address. The firm is
  headquartered in Monaco.)

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• Orchid Island Capital Inc. ORC pays a yield of
  18.50. It also pays its dividends monthly. But
  the dividend payout ratio is dangerously high,
  152.

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• Orchid Island invests in residential
  mortgage-backed securities, mostly single-family
  residential mortgage loans. The yield is high
  because the stock price has been beaten down.

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• And the stock has been beaten down for a good
  reason... the company is losing money at an
  accelerating and alarming rate. Losses in 2014
  were almost 10 times what they were in 2012.

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• At this rate, how safe is the dividend? How long
  until its cut, and how severe will the cut be?
  Things dont look good. The Carlyle Group L.P.
  CGpays a yield of 17.49

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• The private equity firm calls itself a global
  alternative asset manager. Carlyle has been a
  publicly traded company since 2012. The Bin Laden
  family invested 2 million into a Carlyle fund in
  1995.

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• Weeks after the attack on New York Citys World
  Trade Center, the Bin Ladens and Carlyle went
  their separate ways. It runs more than 100 funds,
  many for public pensions, and controls close to
  200 billion in assets.

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• But things at the Carlyle Group arent going
  well. The stock has lost almost a third of its
  value in the past year. Income is trending down.
  

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• And the warning signals for dividend investors
  couldnt be louder... the dividend payout ratio
  is a dangerous 143. Thats a clear indication
  the Carlyle Group is living beyond its means when
  it comes to paying dividends.

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• Things just cant keep going this way. Its only
  a matter of time until the dividend is cut and
  the high yield goes away.

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• How To Be Prepared For High Dividend Stocks To
  Tank

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• These 3 stocks are poster children for high
  dividend stocks about to get in trouble. The
  risks are extreme. The warning signals are
  clear. And the future, for one reason or
  another, is grim.

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• Thats usually the case when you take a closer
  look at high yield dividend stocks. Theres
  usually at least one good reason why the yield is
  high, and at least one reason why smart dividend
  investors stay away.

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• Just like the repo man eventually took off with
  my friends Lincoln, somebodys going to take
  your high yield dividend off the table. The good
  news...
• You can usually see it coming.

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