Three Dow Stocks Almost Certain To Cut Their Dividends
- March 2, 2009
- Dow Dividend Stocks, Featured, High Yield Dividend Stocks
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Almost everyday we have new headlines of top-tier companies slashing their quarterly dividend payments. The economic recession coupled with falling stock prices have combined to present dividend investors with both unique opportunities and increased uncertainty.
General Electric (GE: 15.71 +3.29%), JP Morgan (JPM: 39.83 +1.22%), International Paper (IP: 24.98 +1.59%), and many more companies have announced in recent days that they are cutting their quarterly dividend payment. Escalating dividend yields make many investors wary of trusting any companies dividend payments. Unfortunately, there are still more dividend cuts to come.
Here are three Dow stocks that are almost guaranteed to announce cuts to their dividend plans in the coming weeks.
Alcoa (12.4% yield)
Alcoa’s (AA: 11.05 +2.13%) shares have lost over half their value this year, and that’s after falling 69% last year. The freefalling stock price has cause the company’s dividend yield to jump to 12.4%. However, Wall Street analysts are expecting the company to lose $.50 per share this year. The prospects of posting losses in 2009 combined with over $10 billion in debt on their balance sheet will force Alcoa’s board to reduce their dividend payment. We anticipate a 70% cut to $.05 per share.
Intel (3.9% yield)
Intel (INTC: 21.69 -0.41%) has actually posted one of the better performance in the Dow Jones index this year – falling only 16% since the beginning of the year. However, the economy continues to take its toll on the company’s performance. The latest estimates from Wall Street now expect the company to only earn $.41 per share in 2009. That’s a 55% decline from the $.92 per share the company earned in 2008. With earnings declining, we would expect the company to reset the dividend payout to approximately 50% of net earnings. That would imply a 65% reduction in the dividend payment to $.05 per share.
Dupont (9.4% yield)
Since the beginning of the year, DuPont (DD: 38.34 +1.62%) stock has dropped 31%. The company did declare a $.41 per share quarterly dividend in January, but we expect that the company will feel the pressure to reduce its dividend payment before they payout their next dividend. Their 9.4% yield is already more than twice the average for the Dow Jones index (currently at 4.6%). While the company certainly has a very strong cash position, reducing the dividend payment would allow the company greater flexibility in this uncertain environment.
So we don’t believe that investors should get too enthralled with the high dividend yields of these blue chip companies, because the likelihood that they will remain at these levels is very low.
