2 Dividend-Paying Stocks Income Investors Should Avoid
Wednesday, Nov 13, 2024 12:23 pm ET
6min read Income investors often seek dividend-paying stocks to generate steady returns. However, not all dividend stocks are created equal, and some may pose significant risks. This article highlights two dividend-paying stocks that income investors should avoid due to their recent history and current challenges.
1. Medical Properties Trust (MPW)
Medical Properties Trust (MPW) is a real estate investment trust (REIT) focused on the healthcare sector. While its forward yield of 6.91% may seem attractive, investors should be cautious due to the company's recent history of dividend cuts. MPW cut its payouts twice in one year, which raises concerns about its financial health and ability to sustain distributions.
MPW's troubles began when one of its major tenants, Steward Healthcare, couldn't pay its rent. As a REIT, MPW must distribute at least 90% of its taxable income as dividends, which limits its flexibility in managing cash flow. The company has since found new tenants to occupy 15 of the 23 hospitals previously owned by Steward Healthcare, but this plan is still in its early stages. Income seekers should avoid MPW for now until its financial situation stabilizes.
2. Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance (WBA) is a retail pharmacy giant that recently cut its dividend by 48%. The company has been dealing with slow revenue growth and net losses for several years, with the challenging U.S. retail environment and competition from online pharmacies like Amazon contributing to its poor performances. Walgreens' recent announcement to close 1,200 stores over the next three years and expand its footprints in the primary care market may help, but its dividend sustainability remains uncertain.
Walgreens' recent dividend cut and persistent financial underperformances make it less attractive for dividend investors, despite its high forward yield of 10.7%. The company's expansion into the primary care market and store closures to cut costs may help, but its dividend sustainability remains uncertain. Income investors should exercise caution and monitor Walgreens' progress in this area before considering it as an attractive dividend stock.
In conclusion, income investors should be wary of dividend-paying stocks with a history of dividend cuts or persistent financial underperformances. Medical Properties Trust and Walgreens Boots Alliance are two examples of dividend stocks that income investors should avoid due to their recent history and current challenges. By carefully evaluating dividend stocks and considering their long-term prospects, income investors can make more informed decisions and build a more stable and reliable income portfolio.
1. Medical Properties Trust (MPW)
Medical Properties Trust (MPW) is a real estate investment trust (REIT) focused on the healthcare sector. While its forward yield of 6.91% may seem attractive, investors should be cautious due to the company's recent history of dividend cuts. MPW cut its payouts twice in one year, which raises concerns about its financial health and ability to sustain distributions.
MPW's troubles began when one of its major tenants, Steward Healthcare, couldn't pay its rent. As a REIT, MPW must distribute at least 90% of its taxable income as dividends, which limits its flexibility in managing cash flow. The company has since found new tenants to occupy 15 of the 23 hospitals previously owned by Steward Healthcare, but this plan is still in its early stages. Income seekers should avoid MPW for now until its financial situation stabilizes.
2. Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance (WBA) is a retail pharmacy giant that recently cut its dividend by 48%. The company has been dealing with slow revenue growth and net losses for several years, with the challenging U.S. retail environment and competition from online pharmacies like Amazon contributing to its poor performances. Walgreens' recent announcement to close 1,200 stores over the next three years and expand its footprints in the primary care market may help, but its dividend sustainability remains uncertain.
Walgreens' recent dividend cut and persistent financial underperformances make it less attractive for dividend investors, despite its high forward yield of 10.7%. The company's expansion into the primary care market and store closures to cut costs may help, but its dividend sustainability remains uncertain. Income investors should exercise caution and monitor Walgreens' progress in this area before considering it as an attractive dividend stock.
In conclusion, income investors should be wary of dividend-paying stocks with a history of dividend cuts or persistent financial underperformances. Medical Properties Trust and Walgreens Boots Alliance are two examples of dividend stocks that income investors should avoid due to their recent history and current challenges. By carefully evaluating dividend stocks and considering their long-term prospects, income investors can make more informed decisions and build a more stable and reliable income portfolio.
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