Skip to main content

The Globe and Mail

Chasing dividend yield: The double-edged sword

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.

Story continues below advertisement

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.

Story continues below advertisement

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.

Report an error Licensing Options
About the Author
Streetwise editor

Jody White is the web editor for Streetwise. He previously worked as a senior editor at Canadian Business Online and has written for MoneySense Magazine, Maclean's, the National Post and other national publications. More

Comments are closed

We have closed comments on this story for legal reasons. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.