Hefty Dividends That Could Be In Trouble

Joel Anderson |

MO, OB, SPH, TEG, debt, equity, ratio, valuation, dividend, yield, priceFor investors, the most appealing thing about a dividend stock might be its reliability. Whether the stock goes up or down, an investor can count on some returns for being a shareholder. In a market that's been rocked by volatility, that's an appealing prospect. However, it's easy to forget that dividends are not entirely certain.

While it behooves a company to establish reliability in this regard, dividends can easily go away if a company runs into trouble.  So, here are four companies with strong dividends that, if one were to speculate based on their valuations and other data, might be in trouble in the long term.

Altria Group (MO)

Shareholders in Altria, the world's largest tobacco company, enjoy a healthy dividend yield of 5.83 percent. However, the company may have some underlying issues that, in the long term, might put that dividend in some danger. Altria, formerly Phillip Morris, is carrying fairly large amounts of debt, as can be seen from its relatively high debt to equity ratio. What's more, the company has seen substantial declines in sales and earnings over the last five years. Should things continue to trend downward, one has to wonder if Altria board might ultimately have to reconsider its dividend policy.

OneBeacon Insurance Group (OB)

The 5.37 percent dividend yield offered by OneBeacon is an appealing one, but there are reasons to worry about OneBeacon's future. The insurance writer has seen sales and EPS contract about 7 percent over the last five years, and EPS plunged another 65 percent last year alone. Throw in a PEG that's over four and OneBeacon might have the sort of outlook that could make shareholders wonder how safe their dividends are.

Suburban Propane Partners (SPH)

Suburban Propane is in the propane distribution business, but it has also been distributing a dividend yield of 7.56 percent to its shareholders with pretty regular consistency over the last five year. During that time, though, Suburban has shown sluggish growth in EPS and actually had a 6.4 percent contraction in sales over the same period. Throw in a troubling debt to equity ratio and the strong dividend may not remain so in the future.

Integrys Energy Group (TEG)

Integrys is a holding company with assets in natural gas and electric utilities among others. The company has also paid out $0.66 to $0.68 per share like clockwork since 2007, coming to a current yield of 5.24 percent. However, the company is carrying fairly substantial amounts of debt and both sales and EPS contracted over 5 percent over the last five years. Through in a PEG of over 2 and Integrys may have enough problems to frighten away some of the dividend seekers.

*All data from finviz.com

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
OB OneBeacon Insurance Group Ltd. Class A 18.34 0.07 0.38 89,632 Trade
RGC Regal Entertainment Group Class A 20.62 0.48 2.38 1,207,663 Trade
MO Altria Group Inc. 74.41 0.27 0.36 5,680,989 Trade
SPH Suburban Propane Partners L.P. 22.94 0.02 0.09 239,781 Trade


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