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What are we looking for?

Dividends at risk from companies part of the S&P 500 index.

The screen

We searched the S&P 500 for companies offering relatively high – but at risk – dividend yields. Specifically, we're looking for:

  • A dividend yield of 2 per cent or greater;
  • A dividend payout ratio (dividend per share divided by earnings per share) of 100 per cent or greater, or negative. (A negative payout ratio is a bad sign: It means the dividends are fully financed by existing cash, debt, new share issue);
  • Negative free cash flow to capital. This ratio gives a sense of how well the company uses the invested capital to generate free cash flows, which could be used to stimulate growth, pay and/or increase dividends, reduce debt, etc. A negative figure raises a red flag.

The recent closing price is displayed for informational purposes.

More about StockPointer

StockPointer is a fundamental analysis tool based on an EVA (economic value-added) model to quickly and easily identify investment opportunities. In addition to providing detailed reports on more than 6,500 companies (Canadian and U.S. stocks and American depositary receipts), StockPointer also allows investors to create personalized filters and build custom portfolios.

What did we find?

Some 36 companies from the S&P 500 (roughly 7 per cent of the index) pay dividend yields of 2 per cent or more while also showing dangerous payout ratios. An even more dangerous aspect of these stocks is their attractive dividend yields. While all these stocks yield more than 2 per cent, and some yield more than 4 per cent or even 5 per cent. Investors looking for high income could be very tempted to add one of these companies to a dividend portfolio, but the risky metrics associated with them tell you all these dividends could at some point get cut, or even completely disappear.

The negative free cash flows mean there is more money coming out of the company's pockets than coming in, which really squeezes the capacity not only to increase the dividends but also to maintain them.

Investors are advised to do additional research prior to investing in any of the companies mentioned.

Jean-Didier Lapointe is a financial analyst for StockPointer at Inovestor Inc.

S&P 500 stocks with high, but at-risk, dividend yields

CompanyTickerRecent Price $%Div. (last 12 mo)Div. Payout %FCF / CapitalMkt Cap ($-bil)
Chevron Corp.CVX-N96.334.76%171.20%-7.90%183.00
Bristol-Myers Squibb Co.BMY-N66.072.17%165.56%-5.20%110.00
Kraft Heinz Co.KHC-Q78.472.34%-566.67%-1.20%96.32
Occidental Petroleum Corp.OXY-N70.604.39%-28.02%-9.50%55.24
Kimberly-Clark Corp.KMB-N137.492.77%125.71%-0.10%50.09
Crown Castle Int'l Corp.CCI-N88.053.87%223.33%-1.10%29.71
PG&E Corp.PCG-N59.303.42%101.11%-5.00%29.36
Anadarko Petroleum Corp.APC-N48.292.22%-8.18%-19.00%26.11
Weyerhaeuser Co.WY-N31.244.00%133.33%-1.00%24.46
Baxter International Inc.BAX-N41.843.33%181.43%-0.60%23.20
Equinix Inc.EQIX-Q325.995.85%536.67%-6.50%22.40
Spectra Energy Corp.SE-N30.016.18%493.33%-6.60%21.18
Apache Corp.APA-N50.662.25%-1.69%-6.00%19.71
Boston Properties Inc.BXP-N127.123.02%104.05%-2.70%19.63
Hess Corp.HES-N54.482.06%-9.43%-7.80%17.90
Devon Energy Corp.DVN-N28.773.00%-2.70%-4.90%15.88
FirstEnergy Corp.FE-N35.124.54%102.86%-0.10%15.24
Noble Energy Inc.NBL-N31.762.19%-11.80%-6.50%14.37
Entergy Corp.ETR-N76.964.89%-334.00%-0.80%13.79
Williams Cos Inc.WMB-N16.249.53%-306.25%-6.50%13.10
Freeport-McMoRan Inc.FCX-N9.338.46%-5.04%-7.70%12.80
Macerich Co.MAC-N79.358.22%213.87%-2.10%11.86
Mattel Inc.MAT-Q32.305.59%138.18%-0.40%11.16
Coach Inc.COH-N38.974.12%103.85%-0.10%10.58
Marathon Oil Corp.MRO-N11.785.40%-20.61%-8.40%10.49
Wynn Resorts Ltd.WYNN-Q98.784.34%157.89%-25.40%10.06
CenterPoint Energy Inc.CNP-N20.915.39%-61.88%-0.60%9.04
NiSource Inc.NI-N23.554.25%138.33%-0.80%7.55
Iron Mountain Inc.IRM-N32.687.07%318.33%-2.20%6.94
Oneok Inc.OKE-N29.999.85%202.50%-7.70%6.58
Frontier Communications Corp.FTR-Q5.258.99%-140.00%-0.80%6.00
Murphy Oil Corp.MUR-N25.696.24%-10.85%-11.30%4.79
NRG Energy Inc.NRG-N12.674.93%-2.97%-0.50%4.24
Diamond Offshore Drilling Inc.DO-N21.132.37%-25.00%-2.30%3.09
Chesapeake Energy Corp.CHK-N3.763.89%-0.80%-9.40%2.93

Source: StockPointer

All figures in U.S. dollars.