4 Dividend-Paying Stocks to AVOID

Not every dividend-paying company is faring well these days. Companies like Intel (INTC), Cisco (CSCO), Simon Property Group (SPG), and Macerich (MAC) are finding it difficult to get their bearings in the current market ecosystem and should be avoided.

There is ongoing uncertainty in the markets with the number of coronavirus cases increasing exponentially. High-frequency economic data is starting to show some economic data weakening especially in areas hard-hit by the virus. 

While dividend stocks can be a safe investment option during these times, you need to carefully pick the stocks. In addition to a company’s dividend-paying history, you should check its financial ability to sustain the dividend payment and near-term headwinds that might cause capital depreciation. If you see that a dividend-paying company is witnessing a fall in the demand for its products and services, it could be an indication of weakness in the near term. Weak financial health might lead to dividend cut or suspension.

Dividend-paying companies like Intel Corporation (INTC), Cisco Systems, Inc. (CSCO), Simon Property Group (SPG), and The Macerich Company (MAC) are struggling right now. Their stock prices have taken a severe hit over the year, so it’s better to avoid these stocks for now.

Intel Corporation (INTC)

INTC designs, develops, manufactures, and markets computer processing chips and other types of integrated digital technology. The company has operations in the data center, internet of things, mobile and communications, software and services, and other segments. INTC’s stock has fallen 24% so far this year.

The company has distributed a $0.33 dividend per share for the last four quarters. The company’s dividend payout has a five-year CAGR of 6.9%. The expected annual dividend yield is 2.9% while the four-year average dividend yield is 2.56%.

Though INTC dividend metrics look impressive, the company has rescheduled the release of its 7 nm processing chips to 2022. This move has come as a significant blow to the company as competitors like AMD already have 7nm chips in the market.

The company’s results for the third quarter have also been below expectations. The data center segment of the company’s operations saw a fall in revenue of 7%. Overall, the company’s revenue declined by 4% during the quarter.

INTC’s revenue is expected to fall 13.7% during the quarter ended December 2020 and 5.8% in 2020. The company’s EPS is estimated to decline by 27.6% in the quarter ended in December 2020 and 6.7% in 2021.

INTC is rated a “Sell” in our POWR Ratings system, with an “F” in Trade Grade. Within the 86-stock Semiconductor & Wireless Chip industry, the company is ranked #76.

Cisco Systems, Inc. (CSCO)

CSCO designs, develops, and markets networking products and services. The company has operations in both hardware manufacturing and software development. CSCO’s stock has fallen 13.7% so far this year.

The company has distributed a $0.36 dividend per share for the last three quarters. The company’s dividend payout has a five-year CAGR of 13.27%. The expected annual dividend yield is 3.48% while the four-year average dividend yield is 3.1%.

Even though the company has been paying steady dividends so far, it has announced $1 billion in cost cuts which have included employee lay-offs. The company relies on the sale of expensive networking and communications hardware to Governments and businesses. The sale of such products has seen a decline due to the spread of the coronavirus, and may only recover once the economy gets back on track.

For the quarter ended in October 2020, the company’s revenue saw a decline of 9% compared to the same period last year. CSCO’s EPS also decreased by 25% year-over-year.

CSCO’s revenue is expected to fall by 0.7% for the quarter ended in January 2021 and 1.3% in 2021. The company’s EPS is estimated to decline by 2.6% during the current quarter and 1.9% in 2021.

CSCO is rated a “Neutral” in our POWR Ratings system, with a “C” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. Within the 53-stock Technology – Communication/Networking industry, the company is ranked #20.

Simon Property Group (SPG)

SPG invests in commercial real estates such as malls, lifestyle centers, and premium outlets. It runs as a real estate investment trust. SPG’s stock has fallen 49.9% so far this year.

The company has distributed a $1.3 dividend per share for the last two quarters, a decline of 38% from the previous quarter. The company’s dividend payout has a five-year CAGR of 10.68%. The expected annual dividend yield is 6.96% while the four-year average dividend yield is 5.89%.

The company had to slash its dividend payout due to the closure of several of its retail properties amid the pandemic. The future of shopping centers, which form the core of SPG’s business, remains uncertain due to the rise of e-commerce and changing consumer behavior. The company had plans to redevelop several of its properties, however, a large part of such plans is currently on hold due to financial constraints and the uncertain market. The company has also been in talks to merge with rival mall real-estate company Taubman Centers.

For the quarter ended September 2020, the company’s net income saw a decline of 73.2% compared to the same period last year. SPG’s EPS also decreased by 46% year-over-year.

SPG’s revenue is expected to fall 19.6% for the quarter ended December 2020 and 16.4% in 2020. The company’s EPS is estimated to decline by 35.5% during the quarter and 35.4% in 2020.

SPG is rated a “Sell” in our POWR Ratings system, with an “F” in Buy & Hold Grade. Within the 41-stock REITs – Retail industry, the company is ranked #31.

The Macerich Company (MAC)

MAC is involved in the acquisition, development, and lease of regional and community shopping centers across the United States. MAC operates as a real estate investment trust and is currently the third-largest owner of shopping centers in the United States. The company’s stock has fallen 62% so far this year.

The company has distributed a $0.15 dividend per share for the last two quarters, a decline of 70% from the previous amount. The company’s dividend payout has a five-year CAGR of 4.65%. The expected annual dividend yield is 6.81% while the four-year average dividend yield is 11.6%.

The company has been hit hard by the spread of the coronavirus and has had to close most of its properties due to government mandates. Even though the malls run by the company are now open, there has been a marked decline in customers due to social distancing norms. As there are fears of a second wave of the pandemic, it is unlikely that the company will witness pre-pandemic levels of business soon.

MAC’s revenue is expected to fall 19.3% for the quarter ended December 2020 and 18.1% in 2020. The company’s EPS is estimated to decline by 150% during the quarter and 167.2% in 2020.

MAC is rated a “Sell” in our POWR Ratings system, with an “F” in Buy & Hold Grade. Within the 41-stock REITs – Retail industry, the company is ranked #22. 

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INTC shares were trading at $46.64 per share on Monday morning, up $1.18 (+2.60%). Year-to-date, INTC has declined -20.13%, versus a 13.37% rise in the benchmark S&P 500 index during the same period.



About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks.

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