Dividend stocks have always been one of the best ways to grow wealth, earn income and help protect you from inflation. However, this only holds true if you invest in the right stocks. Companies that decline on yields and price – or worse yet, stop giving out dividends altogether – are losing prospects for any investor. It pays to systematically review your portfolio and check if your holdings are aligned with your long-term goals. It might be a difficult decision, but it might be prudent to dump your dying dividend stocks when they no longer serve your overall strategy.
Not to be confused with undervalued dividend stocks, this article covers three declining dividend stocks worth selling. These companies have been underperforming in both growth and earnings, which I’d consider replacing with better opportunities at the earliest opportunity.
Edison International (EIX)
Edison International (NYSE:EIX) is an electric utility holding company that is operating through its subsidiaries Southern California Edison Company and Edison Energy Group, Inc. The company supplies and delivers electricity in Southern, Central and Coastal California. Their subsidiary Southern California Edison has been a long-time leader in renewable energy and energy efficiency.
The company offers a 4.19% dividend yield, which is high for its size and may look attractive at first glance. However, the problem with the company is its earnings sustainability and high level of debt. Edison International has had inconsistent earnings for the last five years, declining sales growth and a high debt-to-equity ratio of 212.81%, making it one of the more risky dividend stocks to hold.
Analysts at Guggenheim have also downgraded their recommendation on EIX from a Buy to a Neutral, with a new target price average of $72.
V.F. Corp (VFC)
V.F. Corporation (NYSE:VFC) is a multinational company offering apparel, accessories and footwear. The company has a diverse portfolio of iconic outdoor, lifestyle and workwear brands including Timberland, Dickies and Vans.
The company has struggled with declining earnings accruals, cash flow and operating efficiency since 2022. Its revenue for the last three quarters has been in a straight decline. Indeed, its revenue was impacted by a slow recovery in China, higher costs, excess inventories and a declining interest in the brand Vans. In addition, the current inflationary environment is also impacting consumer spending.
The company cut its dividend from $0.51 back in December 2022 to $0.31 per share, booting it from the dividend aristocrats list. VFC has been in a continuous downtrend for the last 2 years, making it one of the dividend stocks investors should consider selling.
AllianceBernstein Holdings L.P. (AB)
AllianceBernstein Holding L.P. (NYSE:AB) is a global investment management firm offering investment management, research and wealth services. They cater to institutions, central banks, governments, endowments, retail and more. The company is known to be one of the leading global investment management firms offering expertise in equities, fixed-income, alternatives and multi-asset strategies.
The company has been experiencing a decline in revenue for the last 4 quarters and an EPS decline in double digits. To put it in perspective, according to its latest release, ABs’ EPS year-on-year decline (for the last four quarters relative to its previous year) is -21.9%, -28.09%, -45.74% and -26.67%. In addition, Jeffries analyst Daniel Fannon has also cut its target price for the company from $35.00 to $33.00.
Based on its last dividend payment, the company offers an annual dividend yield of 7.85% as of July 2023. However, despite a long history of dividend payments, it’s important to note the company’s payouts have fluctuated over the last few years. Combined with its continuous decline in revenue and EPS, this dying dividend stock is one you should consider selling – especially if you are looking for predictable and consistently growing income in your portfolio.