Go To

2 Large Dividend Stocks To Avoid

Over the last couple months, I’ve shown you stocks to avoid…

Stocks to consider buying…

And some of the best stocks related to the coming Internet of Things…  Which you can find linked further below.

All these recommendations are to help you either avoid pain and terrible stocks.  Or to help you find potentially great stocks to invest in during this pandemic.

If you do both well, it helps you earn higher than average investment returns and build your wealth.

Because the fewer investment losses you have the more capital you keep. And the more capital you keep the faster you compound your money.

Today, I want to show you 2 Dividend Stocks to avoid due to their huge debt loads…

Before I get to the stocks though I need to tell you why avoiding huge debt is important when investing…

Especially during the mass uncertainty we’re dealing with today.

Why To Avoid Large Debt

I want to invest in safe stocks that will be around for decades to help me build wealth over the long term.  This helps insure I lose as little money as possible over time.

Typically, this means I invest in companies that have little to no debt compared to their cash and equity.

For example, I look to invest in companies with a debt to equity ratio below 1.

The less debt the company has means the stock has a larger margin of safety in investing terminology because it’s in lower danger of bankruptcy.

When you invest in stocks that have a high margin of safety it makes them safer investments because there’s a far lower chance of them going out of business.

These are the kinds of stocks I want to invest in.

The inverse of this is also true…

Higher debt load lowers margin of safety, increases risk, and increases a company’s chance of bankruptcy.

These are the stocks I want to avoid… Especially with the enormous uncertainty today.

Keep all this in mind because here are 2 large dividend stocks to avoid due to their large debt loads…

Avoid Verizon And Its 4.2% Dividend

In its most recent quarterly data Verizon (VZ) has $7.9 billion in cash and short-term investments.  While it has $134.3 billion in short term and long-term debt and capital leases.

Total liabilities make up 78.5% of its balance sheet.

And its current debt to equity ratio is 1.98.

In other words, its debt makes up 54.7% of its $245.5 billion market cap.

And its debt load is 16X higher than its cash levels.

This is an enormous amount of debt you should avoid right now… Even though its paying you a 4.2% dividend.

Avoid Kimberly Clark and Its 2.9% Dividend

In its most recent quarterly data Kimberly Clark (KMB) has $1.5 billion in cash and short-term investments.  While it has $8.1 billion in short term and long-term debt and capital leases.

Total liabilities make up 98.3% of its balance sheet.

And its current debt to equity ratio is 26.95.

In other words, its debt makes up 16% of its $50.5 billion market cap.

And its debt load is 5.2X higher than its cash levels.

This is a large amount of debt you should avoid right now… Even though its paying you a 2.9% dividend.

Conclusion

Does any of this mean I think the two companies above are in imminent danger of going bankrupt?

No.

Does this mean I think their stocks are going to crash soon?

Again, no.

But these large amounts of debt at each company worries me enough to recommend you avoid buying their stocks… Even though they pay large dividends.

Especially with the enormous amount of uncertainty right now due to the coronavirus.

Use the following links to some of our recent articles to learn other ways to protect your investments in these uncertain times. 

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

Comments are closed.