It’s the best of times and the worst of times for income-oriented investors right now. The good news is that the U.S. Federal Reserve seems to be serious about raising interest rates.
Policymakers have raised interest rates three times in 12 months, and have been clear that investors should expect another rate hike by year end. This push and pull on interest rates will mean a lot of uncertainty for income investors.
So how do you know which investments are tricks, and which ones are treats? To help you decide, here’s a list of dividend stocks that look awfully scary this October, and may be worth selling.
General Electric Co. (NYSE: GE)
General Electric was a favorite of long-term, income-oriented investors. Now, it’s one of the least popular blue chips on Wall Street.
Shares are down more than 20 percent so far this year, making it the biggest loser among Dow Jones industrial average components in 2017. Revenue and profits are flat, and short-term fixes can’t be repeated in future quarters.
With a dividend north of 3 percent, you may be tempted to bargain hunt in GE because it’s such a big and respected name. But keep in mind that analysts from JPMorgan recently labeled GE a sell because it’s “worse than we think.”
Take their advice and leave this spooky stock behind in October before it falls further.
Click here to learn more about GE stock.
Coca-Cola Co. (KO)
While it may be one of the most powerful brands in the world, Coca-Cola still faces the unfortunate reality that its flagship products are out of favor.
Sure, Coke has tried to diversify with its Full Throttle energy drinks, Powerade sports drinks and Dasani bottled water. But fizzy, sugary beverages are still its forte. That’s bad news, because soda consumption has hit a 30-year low. And, shares have only delivered a fraction of gains seen in the broader market.
Longer term, KO stock has risen less than 20 percent in the last five years versus over 70 percent for the Standard & Poor’s 500 index. You can get much better returns — and even better dividends — elsewhere.
Click here to learn more about KO stock.
AMC Entertainment Holdings (AMC)
Another stock in trouble because of widespread changes in consumer behavior is AMC.
The movie theater operator may pay a dividend north of 5 percent, however it is stuck in a rather rough spot as theater viewership is steadily declining. Just consider that the summer blockbuster season just wrapped up its worst run in 11 years.
AMC will actually finish fiscal 2017 operating at a loss as it looks to restructure and invest big in digital initiatives that could pay off down the road. But it remains to be seen what the company can do to stop this broad shift in consumer behavior and the company is doomed for a frightening 2018.
Click here to learn more about AMC stock.
Centurylink (CTL)
It’s rough for smaller telecoms. Look at the roughly 40 percent decline in Centurylink from its 52-week high at the end of 2016.
Adding to shareholders’ pain is the prospect of dividend cuts. Right now, the $2.16 annual dividend payout of CTL is well above the $1.90 or so in earnings predicted this year.
CTL is finalizing a massive $24 billion merger with Level 3 in an ambitious bid to upgrade its high-speed internet business, requiring capital when there isn’t much to spare. The merger is a bold gambit, but also a last-ditch effort to survive in a space dominated by bigger telecom players. Don’t be taken in by a double-digit dividend yield.
Click here to learn more about CTL stock.
Campbell Soup Co. (CPB)
Campbell Soup is another powerful brand behind the times of consumer tastes.
Sure, it used to be a powerhouse of comfort foods. And yes, it has other offerings — including Prego sauces and V8 juices. But CPB stock is a stagnant company that is at best stagnant and is at worst slowly declining.
Sales will decline modestly in fiscal 2017 if predictions hold, and will grow a measly 1 percent in 2018. The company has fallen short fairly regularly when reporting its quarterly profits — most recently in August where it also lowered its guidance.
What good is a 3 percent dividend when shares are down more than 20 percent and looking to head lower?
Click here to learn more about CPB stock.
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5 Scary Dividend Stocks to Sell in October originally appeared on usnews.com
