It’s no secret that as the dollar continues to strengthen, multinationals are suffering as profits are pinched. We’ll see the real impact of this during first-quarter earnings season, which kicks off in early April. In the meantime, investors are flocking to stocks with high dividend yields, which are especially attractive in this low interest rate environment. The in-flows into quality high dividend stocks are so strong now, that I recently recommended two big dividend plays in my Blue Chip Growth newsletter.
Now, not all dividend stocks are created equally; many dividend plays are becoming increasingly risky due to erratic sales and earnings growth. For example, Chevron (CVX) recently suspended all of its stock buyback activity due to recent operating losses and declining sales. That’s a big red flag, as far as I’m concerned.
So, it’s not a far-fetched possibility that many big multinational companies may cut their dividends. And if a flagship stock cuts its dividend due to eroding sales and/or earnings, this will make a lot of yield seekers unhappy.
I’ve been monitoring big dividend payers, and found that the following five companies are struggling in the current strong dollar market. If you currently own any of these five stocks I strongly recommend you find a good time to take profits.
If you’re not familiar with the company, Caterpillar Inc. (CAT) is the world’s largest manufacturer of earth-moving equipment. With a workforce of more than 114,000, Caterpillar brings in $55 billion in annual sales. CAT products range from industrial gas turbines to mini excavators. So if you need heavy equipment to mine, build or do just about anything, you need Caterpillar. CA currently pays a dividend yield of 3.32%. CAT fairs slightly better in Portfolio Grader, but not by much, earning a D-grade.
Garmin Ltd. (GRMN) was founded in 1990 and is based in Schaffhausen, Switzerland. The company manufactures and designs portable GPS products. The company has five segments: Auto/Mobile, Aviation, Marines, Outdoor, and Fitness. Garmin brings in more than $2 billion in revenue each year and has a workforce of more than 10,000 worldwide. GRMN pays a dividend yield of 3.64%. Portfolio Grader rates GRMN as a D-rated sell, thanks to the company’s poor buying pressure and lackluster fundamental metrics.
Mattel, Inc. (MAT) was founded in 1945 and manufactures, creates, and markets a wide array of toy products worldwide. The company is broken into three segments: North America, International, and American Girl. The company is probably most well-known for its Hot Wheels, Fisher Price and Disney product lines. Mattel has a workforce of 31,000 employees worldwide and brings in more than $6 billion in revenue each year. MAT pays a dividend yield of 6%. MAT also suffers from poor buying pressure and also earns an F-grade in Portfolio Grader.
Transocean Ltd. (RIG) is an offshore contract drilling company that operates worldwide. The company specializes in in deep water and harsh environment drilling. As of 2014, the company owns or has partial ownership interests in 79 mobile offshore drilling units. Transocean has more than 15,000 employees worldwide. RIG currently pays a hefty dividend yield of 18.81%. However, this is because RIG has lost over half of its value in the past six months. So while RIG’s yield is very impressive, the company’s overall score in Portfolio Grader is pretty dismal, earning an F-grade. Like the other stocks, RIG’s buying pressure seems to be weighing the stock down.
Wynn Resorts Ltd. (WYNN) operates luxury casino resorts in Las Vegas, Macau and Singapore. Macau is dominating the company’s growth and is the only place in China where gambling is legal. The company has expanded its two major markets, Las Vegas and Macau, with the Encore next to the Wynn Las Vegas, and the Encore adjacent to Wynn Macau. In total, Wynn brings in more than $5 billion in revenue each year. WYNN pays a dividend yield of 4.08%. WYNN currently earns an overall F-grade in Portfolio Grader, mainly due to the stock’s failing buying pressure.
The truth of the matter is that dividends are still rising, but I’m worried that yield seekers will become nervous when they see sloppy sales and earnings with some of their favorite multinationals. So, right now I recommend sticking with dividend stocks that have good sales and earnings, and avoiding stocks that have poor buying pressure. As always, you can do this quickly and easily by running any potential new buys through Portfolio Grader.