High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts

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Dividend Payout Ratio

Notwithstanding their long records of rising dividend distributions and their ability to protect portfolios from sizeable losses during bear markets, some high dividend payout ratio stocks might be in danger of dividend cuts.

Many income investors choose to trade some potential asset appreciation for relative safety of long-term dividend income payouts. Therefore, large-cap equities with long streaks of rising dividend payouts tend to deliver lower growth rates during bull markets. Some investors are willing to pay that price in exchange for lower volatility and a better performance over a very long time horizon.

However, a high payout ratio can threaten future dividend boosts, or even result in dividend cuts and outright suspensions. Therefore, in addition to many other metrics, investors must pay close attention to the dividend payout ratios.

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The payout ratio indicates what share of total earnings is paid out as dividends and is generally calculated as a ratio of total annual dividend amount and the total earnings per share (EPS). Investors generally consider a payout ratio between 30% and 50% to be sufficient and sustainable.

Ratios below that range indicate that the equity does not distribute enough of its earnings to the stakeholders as dividend income. Alternatively, ratios higher than 50% – and especially above 100% – signal that the equity might not be able to sustain current levels of dividend payouts for extended periods. While some equity types are required to distribute 90% or more of earnings to enjoy certain tax benefits, payout ratios significantly higher than 100% are still worrisome.

Some of the equities below are required to have high ratios. However, even for that type of equity, a payout ratio of nearly 200% – Realty Income Corporation (NYSE:O) – might result in a dividend cut if it persists.

While a high payout ratio is certainly not a deal-breaker, the measure must be part of a larger set of metrics that investors use to identify the best equities for their individual portfolio goals.

 

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High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #15

Kellogg Company (NYSE:K)

Payout Ratio: 81%

Dividend Yield: 3.73%

Market Cap: $0.90 Billion

Sector: Consumer Products

First Dividend: 1923

Consecutive Annual Hikes: 15 years

April 1, 2020 Closing Price: $61.09

Total Return (1Y, 3Y, 5Y): 13.1%, -7%, 8%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #14

Enterprise Products Partners L.P. (NYSE:EPD)

Payout Ratio: 84%

Dividend Yield: 12.91%

Market Cap: $0.10 Billion

Sector: Energy

First Dividend: 1998

Consecutive Annual Hikes: 19 years

April 1, 2020 Closing Price: $13.79

Total Return (1Y, 3Y, 5Y): -45.5%, -30%, -31%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #13

International Paper Company (NYSE:IP)

Payout Ratio: 85%

Dividend Yield: 6.80%

Market Cap: $1.80 Billion

Sector: Materials

First Dividend: 1946

Consecutive Annual Hikes: 10 years

April 1, 2020 Closing Price: $30.15

Total Return (1Y, 3Y, 5Y): -32.5%, -29%, -28%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #12

Franco-Nevada Corporation (NYSE:FNV)

Payout Ratio: 93%

Dividend Yield: 0.97%

Market Cap: $8.20 Billion

Sector: Materials

First Dividend: 2008

Consecutive Annual Hikes: 11 years

April 1, 2020 Closing Price: $102.73

Total Return (1Y, 3Y, 5Y): 39.1%, 61%, 116%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #11

Philip Morris International, Inc. (NYSE:PM)

Payout Ratio: 101%

Dividend Yield: 6.58%

Market Cap: $10.60 Billion

Sector: Consumer Products

First Dividend: 2008

Consecutive Annual Hikes: 11 years

April 1, 2020 Closing Price: $71.12

Total Return (1Y, 3Y, 5Y): -14.1%, -25%, 22%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #10

Exxon Mobil Corporation (NYSE:XOM)

Payout Ratio: 104%

Dividend Yield: 9.27%

Market Cap: $58.70 Billion

Sector: Energy

First Dividend: 1882

Consecutive Annual Hikes: 37 years

April 1, 2020 Closing Price: $37.53

Total Return (1Y, 3Y, 5Y): -49.8%, -42%, -37%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #9

AT&T, Inc. (NYSE:T)

Payout Ratio: 108%

Dividend Yield: 7.42%

Market Cap: $1.20 Billion

Sector: IT & Communications

First Dividend: 1881

Consecutive Annual Hikes: 15 years

April 1, 2020 Closing Price: $28.05

Total Return (1Y, 3Y, 5Y): -5.8%, -18%, 15%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #8

Extra Space Storage, Inc. (NYSE:EXR)

Payout Ratio: 111%

Dividend Yield: 3.83%

Market Cap: $2.10 Billion

Sector: Financials

First Dividend: 2004

Consecutive Annual Hikes: 10 years

April 1, 2020 Closing Price: $94.00

Total Return (1Y, 3Y, 5Y): -3.5%, 40%, 63%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #7

Essex Property Trust, Inc. (NYSE:ESS)

Payout Ratio: 119%

Dividend Yield: 4.15%

Market Cap: $3.20 Billion

Sector: Financials

First Dividend: 1994

Consecutive Annual Hikes: 19 years

April 1, 2020 Closing Price: $200.32

Total Return (1Y, 3Y, 5Y): -27.8%, -4%, 4%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #6

The Procter & Gamble Company (NYSE:PG)

Payout Ratio: 170%

Dividend Yield: 2.73%

Market Cap: $69.90 Billion

Sector: Consumer Products

First Dividend: 1891

Consecutive Annual Hikes: 66 years

April 1, 2020 Closing Price: $109.33

Total Return (1Y, 3Y, 5Y): 8.4%, 31%, 50%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #5

Digital Realty Trust, Inc. (NYSE:DLR)

Payout Ratio: 186%

Dividend Yield: 3.33%

Market Cap: $8.10 Billion

Sector: Financials

First Dividend: 2004

Consecutive Annual Hikes: 14 years

April 1, 2020 Closing Price: $134.48

Total Return (1Y, 3Y, 5Y): 15.7%, 38%, 136%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #4

Realty Income Corporation (NYSE:O)

Payout Ratio: 198%

Dividend Yield: 6.03%

Market Cap: $5.50 Billion

Sector: Financials

First Dividend: 1994

Consecutive Annual Hikes: 19 years

April 1, 2020 Closing Price: $46.47

Total Return (1Y, 3Y, 5Y): -32.3%, -9%, 15%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #3

Dominion Energy, Inc. (NYSE:D)

Payout Ratio: 228%

Dividend Yield: 5.38%

Market Cap: $7.50 Billion

Sector: Utilities

First Dividend: 1925

Consecutive Annual Hikes: 16 years

April 1, 2020 Closing Price: $69.93

Total Return (1Y, 3Y, 5Y): -4.0%, 3%, 20%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #2

Chevron Corporation (NYSE:CVX)

Payout Ratio: 316%

Dividend Yield: 7.53%

Market Cap: $28.80 Billion

Sector: Energy

First Dividend: 1912

Consecutive Annual Hikes: 19 years

April 1, 2020 Closing Price: $68.56

Total Return (1Y, 3Y, 5Y): -41.2%, -23%, -13%

 

High Dividend Payout Ratio Stocks Might Be in Danger for Dividend Cuts: #1

Altria Group, Inc. (NYSE:MO)

Payout Ratio: 349%

Dividend Yield: 8.93%

Market Cap: $9.80 Billion

Sector: Consumer Products

First Dividend: 1928

Consecutive Annual Hikes: 10 years

April 1, 2020 Closing Price: $37.61

Total Return (1Y, 3Y, 5Y): -29.1%, -35%, 2%

 

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Ned-Piplovic

 

Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.


 

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