The Dividend Disaster Zone: 3 Stocks to Sell Before the Payout Gets Slashed

Stocks to sell

Often when investors choose dividend stocks as part of their portfolio, the aim is to generate more money through the quarterly dividend. They can then either take a cash payout or reinvest the dividend to purchase more of that specific stock thereby increasing its dollar value. 

However, as with all things in the market, the dynamics of various dividend stocks change over time. While some stocks may continuously up their dividend, in an attempt to attract more retail and institutional investors, others may fall on hard times, requiring them to lower their dividends or cut them altogether.

In these cases, a dividend stock loses what was once its biggest draw, and ultimately becomes an uncompetitive position when compared to other, better-yielding dividend stocks. Here are three such examples of dividend stocks to sell due to diminishing or entirely vanishing dividend yields.

Sirius XM Holdings (SIRI)

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At one point in time, Sirius XM Holdings (NASDAQ:SIRI) commanded consumer attention as a must-have addition to their new cars. Thanks to the relatively novel technology of satellite radio, the company had a monopoly on the service when it was one of the few who heavily invested in signal access at the time. However, as music streaming via 4G and 5G networks became both more accessible and reliable, SIRI’s prospects dwindled.

Today, the company is a shell of what it was in the early 2000s, yet has managed to hold on to some customers and find a steady price in the $2 range. This has allowed it to offer a dividend yield of 3.88% in recent times. However, this dividend does not stem from an expanding company, but rather one operating as a radio service provider in an era that increasingly does not listen to radio.

While SIRI has managed to gently raise the dividend over the years, it has struggled with its asset-to-liability ratio: its last quarter saw $11.2 billion in assets for $13.5 billion in liabilities on its balance sheet. As such, its dividend could be at risk should subscriber counts dip and internal finances need restructuring.

Globe Life (GL)

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Down a stunning 32% year-to-date, Globe Life’s (NYSE:GL) 1.17% dividend could be at risk of being slashed. The company has a history of cutting dividends in times of financial struggle. For example, GL cut its quarterly dividend from 16 cents a share to 11 cents back in 2011. It then performed another cut in 2013 but has been on the rise ever since, now reaching 24 cents per share. 

However, despite a decent quarterly earnings report for Q1 2024, the company’s market capitalization cratered due to fraud allegations regarding its insurance policies. While Globe Life denied the allegations, its price has still not recovered, and should they prove true from a deeper investigation, further mayhem could ensue.

As such, investors who are attracted to Globe Life’s insurance business model and its corresponding dividend may want to wait out the current news cycle or sell for a better position at a later date.

Meridian (MRBK)

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While lesser known to retail investors, Meridian (NASDAQ:MRBK) has been on my list of stocks to avoid for a while. Despite its status as a Mid-Atlantic banking provider, the company has continually struggled to stay financially competitive from an investing standpoint. Its regular services like small-business loans, account management and savings accounts have done little to separate it from the pack. Of course, its regional focus should help it win out over the long term, but quarter after quarter, the company is in the red.

Revenue amounted to $21.73 million for Q1, representing a 5.19% year-over-year (YOY). This contributed to a net income of $2.68 million, which was a whopping 33.45% loss YOY. Continuously losing profits and slimming margins mean a bank’s capability to remain liquid and invest for future savings yields is greatly diminished. As such, Meridian could be among the dividend stocks to sell as it struggles to recoup from its financial losses and risks a dividend cut to retain more cash.

On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Viktor Zarev is a scientist, researcher, and writer specializing in explaining the complex world of technology stocks through dedication to accuracy and understanding.

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