5 Dividend Stocks to Avoid and 5 to Buy for 2016

Most stocks that pay meaningful yields today do so because their stock prices are cheap. Their dividends are being paid from earnings that aren’t there. Big oil is a big dividend trap. A low payout ratio — the percentage of earnings a company pays out to investors — is generally a good thing. Until that number turns negative, that is.

BP plc (BP) lost $2.49 per share over the last 12 months while stubbornly paying out $2.40 in dividends – for a big yet unsustainable current yield of 7.8%. How’d it fill the gap? Almost $5 billion in additional long-term debt. Meanwhile Chevron (CVX) and Exxon Mobil (XOM) — paying 5% and 3.9% respectively — are, to their credit, making money. I haven’t recommended a utility to my subscribers in nearly two years because the valuations became too rich. The Utilities SPDR (XLU) vpays just 3.7% today. As discussed, government bonds aren’t going to pay you much today. The 10-year pays 2.2%, and the 30-year just 3%. The SPDR Barclays High Yield Bond ETF (JNK) shed 12% over the last 6 months.

Source: InvestorPlace

Related Articles:
- Building Yield: 7 Consumer Goods Dividend Stocks
- 9 Higher-Yielding Financial Services Stocks With Rising Dividends
- Dividend Stocks vs. a Safe Distribution Rate
- 12 Under-Valued Dividend Stocks
- Successful Investors Take The Emotion Out