What’s not to like about high yield dividend stocks? Ordinarily for investors, these assets are attractive because they allow for a quick payoff in the form of an immediate, tangible reward. However, this simple approach to analyzing the implications of a high dividend yield often shields other red flags.
What a dividend yield indicates is the ratio of the share price of a stock to the dividend amount. That means that as a dividend yield percentage gets higher it could mean that the dividend itself is getting larger. However, it could also signify that the stock price itself is falling. This is obviously a bad sign for a company, so while a high yield dividend may be a rewarding investment in the short-term, it may not have much long-term viability. Beyond that, if a company is paying out a high dividend it is not reinvesting that money in growing its business.
While novice investors may be quick to jump at high yield dividend stocks, many institutional investors realize that everything is not as rosy as it seems with these assets. That is why they engage in selling these stocks. Institutional selling usually indicates that sophisticated market players have done their due diligence before deciding to unload an asset.
Business Section: Investment Ideas
In order to identify stocks that may be headed for a decrease in price, we combined the two aforementioned factors – dividend yields above 10% and significant net institutional selling in the current quarter.
What do you think, are “smart money” investors right to dump these names?
1. Baltic Trading Limited (BALT, Earnings, Analysts, Financials): Market cap at $71.54M, most recent closing price at $3.13. Net institutional sales in the current quarter at -1.5M shares, which represents about 9.45% of the company’s float of 15.87M shares. Current yield at 11.55%.
2. Diana Containerships Inc. (DCIX, Earnings, Analysts, Financials): Focuses on the ownership and operation of containerships. Market cap at $192.17M, most recent closing price at $5.93. Net institutional sales in the current quarter at -966.3K shares, which represents about 5.16% of the company’s float of 18.71M shares. Current yield at 20.65%
Use the Compar-O-Matic to compare changes in dividend yield over the past years:
Use the Turbo Chart to Compare the Performance of the First Two Companies in the List to the S&P 500:
Written by Dan Connelly
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Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Baltic Trading Limited (BALT, Chart, Download SEC Filings)
- Diana Containerships Inc. (DCIX, Chart, Download SEC Filings)
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