Two Dangerous Dividend Stocks

Dividends are an investor’s best friend. According to Standard & Poor’s, over the past several decades, about 40 per cent of the total return of the S&P 500 can be attributed to the reinvestment of dividends. Case in point, over the past five years (ended Aug. 31), the S&P 500 had a simple return of 53.5 per cent. That number jumps up to nearly 88 per cent over the same period, if the dividends are consistently reinvested throughout.

Even so, investors need to be cautious and not just chase the highest yields out there. With that in mind, I recently searched for outsized dividends that could be in danger. These payouts are either in peril of being cut, or the underlying stock may underperform the broader market and eliminate the benefit of the income. In my opinion, Pitney Bowes is the poster child of a dividend in peril. The company’s earnings are expected to decline the next three years.RR Donnelley is another stock who’s 8.8 per cent dividend yield may not be as attractive as initial glance, after taking a closer look at the company’s underlying fundamentals.

Source: Globe and Mail

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