5 F-Rated Dividend Stocks to Avoid

5 F-Rated Dividend Stocks to Avoid

A diverse stock portfolio, including dividend stocks, makes up a well-balanced investment portfolio. Those dividends are useful even in a rising portfolio. They make recurring payments that can be reinvested or utilized to cover cash flow needs. Furthermore, dividend-paying corporations are more stable and less risky.

That isn’t always the situation, though. When it comes to dividend stocks, one must be cautious. A big payout is sometimes used by firms in distress to entice investors. Start-ups will periodically pay a dividend, but there’s no guarantee that this trend will persist.

In some cases, a high dividend yield might mask a decreasing stock price.

Below are dividend stocks to sell:

1. Texas Pacific Land Corporation (TPL)

Texas Pacific Land Corporation has been handling approximately 800,00 acres of land in Texas for over a century. Its main business is recovering royalties from oil and gas companies. It also runs a water-related business on the property, dealing with concerns such as water source and infrastructure. Over the last five years, TPL stock has returned an amazing 335 percent.

TPL, on the other hand, is a no-go when it comes to dividends. The company’s most recent quarterly dividend payout of $2.75 yielded 1.47 percent. That’s a minor issue, but the more serious one is the intermittent pattern of dividend distributions. The company has only paid out 13 dividends since 2012. The $26 per share it paid out in 2020 (over two installments) is significantly higher than the $11 per share it handed out in 2021 (over four quarterly payments of $2.75 per share).

2. Hess (HES)

Another American oil and gas firm is Hess Corporation. It used to own and run a gas station franchise, however divested it in 2014 to concentrate on oil and gas production.

Oil and gas businesses face a foggy future with the movement for a zero-emission environment and making it easier for people to choose battery-powered electric cars. The firm’s manufacturing arm is enjoying a moment right now, but it’s only a blip in the big picture of things. President Biden has halted new oil and gas leases on federal land and oceans, however, oil and gas corporations have little incentive to spend on exploration.

To put it another way, buying HES stock is an investment in an industry with an unpredictable future. Hess has delayed raising its quarterly dividend for the longest time and has overlooked it entirely on several occasions in past years, underscoring this reality. It is now priced at 25 cents a share, the same as it has been since September 2013. Hess did not pay any dividends for the whole of 2020 and only made three payments in both 2018 and 2019.

A declining industry, a fixed dividend payout, and a history of missing dividend payments. If you are in search of dividend stocks, that’s not a terrific combination.

3. Dominion Energy (D)

Virginia-based Dominion Energy is a multinational corporation that serves over 6 million clients in 16 states with electricity and natural gas. It also possesses 1.2 trillion cubic feet of natural gas and oil reserves and manages 14,000 miles of natural gas pipelines. Its origins date back over a century. On the Chesapeake Bay, it runs a huge LNG (liquid natural gas) facility.

Dominion presently has a total return of 3.42 percent. Following this fact, why should this stock be avoided, you may wonder? The most recent quarterly dividend paid by the corporation was 63 cents per share. It was 94 cents per share for much of 2020. It was 92 cents in 2019. Furthermore, D stock is presently trading at the $74 level, which is exactly where it was 5 years earlier. Dominion disappointed in revenue projections in the most recent quarter, recording revenue that was down 11.9 percent year over year.

A stagnant stock price decreased sales, and a cut dividend is all factors to consider. It’s not looking good for investors trying to diversify their portfolios with blue-chip dividend firms.

4. Plains All American Pipeline (PAA)

Plains All American Pipeline owns and manages an extensive array of pipelines and storage terminals for oil, natural gas, and LNG transit. The company is based in the United States and Canada. PAA claims to carry well over 5 million barrels of crude oil and LNG across its pipeline daily.

Plains All American Pipeline has a highly appealing 7.27 percent dividend yield, which will appeal to investors searching for dividend stocks. Individuals should not be fooled.

The dividend yield has stayed strong despite the company’s quarterly dividend payout dropping for years (from over $1 in 2012 to the current 18 cents per share). This is because PAA’s stock has been in freefall. It has ended up losing 70% of its worth in the last five years. At the moment, this dividend stock offers neither consistency nor track record.

5. Vornado (VNO)

Vornado Realty Company, a real estate investment trust, was one of the key actors in the collapse of store Toys “R” Us.
Investors seeking dividend stocks will be interested in Vornado’s 5.03 percent dividend yield. Purchasing Vornado stock only for the dividend yield will indeed, nevertheless, be a miscalculation.

It’s no revelation that the pandemic is putting financial strain on the corporation. It lost a lot of money because firms that rented space in its buildings closed down, and the commercial real estate market is still struggling. Credit rating agencies have downgraded it. While VNO stock is up slightly in 2021, it has dropped by 49% in the last five years. The high dividend yield is due to the stock price’s recent decline.

The Author

Oladotun Olayemi

Dotun is a financial enthusiast who specializes in first-in-class financial content, including crypto, blockchain, market, and business, to educate and inform readers.