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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

Number Cruncher

Chasing dividend yield: The double-edged sword Add to ...

What we’re looking for

Dividend stocks, the juicier the better.

With Europe in a deep funk and the United States wrestling with a stubbornly anemic economy, many investors have embraced dividend stocks as a reliable source of income.

More about today’s screen

The sectors of focus today are utilities, consumer staples and health-care, courtesy of Bloomberg’s Constantin Cosereanu. Each stock meets the following criteria:

- traded on U.S or Canadian exchanges.

- has a current dividend yield of greater than 4 per cent.

- has paid dividends over the past five consecutive years.

What we found

Don’t be fooled by double-digit dividend yields.

Many of the stocks with the highest dividends have been on the decline over the past year, especially Capstone Infrastructure Corp. and Ferrellgas Partners LP, both of which have suffered stock price plunges.

Digging deeper, we see that Brookfield Renewable Energy (with a more reasonable dividend yield of 5.1 per cent) has a total one-year return of 25.8 per cent. The song is the same for Altria Group Inc., with a total one-year return of 22.7 per cent.

The lesson here is to keep the big picture in mind at all times. Sky-high dividends mean little if the stock is a chronic underperformer.

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