What can 5% do for you these days? Can 5% keep the bear from mauling you? Is it something that you can live with, given that the gross domestic product is anemic with no signs yet of a pick-up?
I ask this because you can get a 5% yield from a host of companies that can, right now, pay that yield without much problem. You just don't know if it is enough to keep the bear at bay and not lose more of your principal while you collect those dividends.
Consider the cases of Verizon (VZ) , AT&T (T) , Ford (F) , Kohl's (KSS) and Macy's (M) . Every one of those companies now pays a dividend that yields north of 5%. Given that the 10-year clocks in at 2.3%, that's an appreciable advantage, one that makes sense to consider.
But let's figure out if it's a cushion or a trap.
First, when Verizon reported recently, it shed 300,000 customers in what was pretty much of a shock to Wall Street. If Trifecta Stocks portfolio name AT&T had reported before Verizon, its decline of 191,000 would have been shocking, too.
These two companies are in the fight of their lives with Sprint (S) , which reports Wednesday and T-Mobile (TMUS) , which gained 1.1 million customers for the quarter. I have always felt good about the dividends of Verizon and AT&T because of their huge cash flows, and I still think that the amount of money they take in is extraordinary.
This was the first quarter, though, when you realized that AT&T had to buy Time Warner (TWX) because growth isn't just elusive, it is non-existent. Verizon had to gamble with Yahoo (YHOO) and AOL (AOL) even as, in light of this reported sub loss, it looks like the gamble -- even if it goes perfectly -- won't in fact cover the losses.
AT&T's stock is down 8% for the year, but still three points off its low. I think those points could still be surrendered. Verizon hit its low yesterday and is off 14% for the year. It's tempting, but the comments coming out of the company lately about merging with pretty much all comers smacked of some serious desperation. I don't know if 5% compensates you for the risk of further customer degradation.
When I spoke with Ford's CEO Mark Fields last week, I felt terrific about the cash flow backing up the dividend and I think that Income Seeker portfolio holding Ford is going to generate a ton of cash for the rest of the year. There's one problem, though, and it is a real problem: Ford is not forecasting an up year. I think that the company's being too downbeat. But the issue is who, in this market, is willing to own a stock where the company's saying 2017 isn't the year when things can turn? I can't think of a soul on the institutional side.
That downbeat forecast will most likely come true because Ford, unlike General Motors (GM) , is largely domestic, and Ford's willing to accede to the idea that we in the U.S. are in peak auto mode. Plus, the company has to spend, and spend, and spend some more to launch new models and develop autonomous cars.
Sure, its SUVs and its trucks are doing incredibly well. Nevertheless, it won't be enough to turn the year around. The good news? I don't see the stock going lower, because so much negativity is baked in, but you need some upside and I don't know where it comes from.
Now, how about these department stores? I know that their model seems definitively broken. I also think, though, that traffic did trough in February and you might very well get a trade out of these two when they report on May 11.
I think that Macy's can tell a story of keeping stores in A malls that make money and therefore support the potential for a turn. The stock's down 19% and it is due for a bounce. Kohl's, though, I actually think can do well, and with the stock down 23% I find it downright tempting.
Hmm, slim 5% pickings for all. But these stocks didn't fall so low because the companies behind them were doing well. Still, of the fivers, I can live with Kohl's. The rest? I want more yield, which means I want lower prices before I can bless them.