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Dividends are never a guarantee. These three stocks have made massive cuts to their payouts this year

Dividend stocks can be attractive options for long-term investors, in part because of the recurring income they can generate. But investors should remember that dividend payments are not a guarantee, regardless of a company’s distribution track record. Investors should consider a company’s future growth prospects as part of their analysis of whether to invest for the long term, even in dividend stocks.

Three stocks that made drastic changes to their dividend payments this year that surprised some investors Estee Lauder (NYSE:EL), Trust medical properties (NYSE: MPW)And Intel (NASDAQ: INTC). Here’s why these cuts happened, and why the cuts may not have been all that surprising.

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In October, cosmetics company Estée Lauder withdrew its forecast for the year based on what it saw in the troubling Chinese market. It also nearly halved its dividend. The cut comes as the struggling company also has a new CEO taking over, Stéphane de La Faverie, to right the ship.

A quick look at the stock’s payout ratio makes it clear why a dividend cut might not have been all that surprising.

EL payout ratio data by YCharts

Deteriorating economic conditions, especially in China, are weighing on business, with Estée Lauder posting a net loss over the past two quarters. Until that situation improves, it will be difficult to determine whether the company can justify the payment each pay no dividends at all to its shareholders.

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For now, the dividend remains intact and yields 2%, but investors shouldn’t assume there won’t be another cut in the future.

One company that has cut its dividend several times in a short period of time is the Real Estate Investment Trust (REIT), Medical Properties Trust. The REIT focuses on properties related to the healthcare sector, and like any other sector, its operations will depend on the strength of its tenants.

Unfortunately, Medical Properties’ portfolio includes several troubled tenants, including Steward Health, which recently filed for bankruptcy protection. Although Medical Properties recently transitioned from Steward Health, there are still questions about the company’s operations and how strong the company will be in the future. The REIT has been selling off assets, and with a smaller portfolio it may not be able to pay even a reduced dividend. Its current quarterly payout of $0.08 is less than a third of the $0.29 it paid to shareholders a year and a half ago.

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