The Three Stocks At The Top Of My “Naughty” List

When I created SafetyNet Pro years ago, my goal was to provide an easy-to-use tool where investors could ascertain whether their dividends were safe or susceptible to a cut.

Depending on the situation, a dividend cut can lead to a drop in the stock’s price. And for investors who rely on dividend income to pay their bills, a reduction in a dividend can have damaging effects to their financial well-being.

SafetyNet Pro was launched to help those investors avoid nasty surprises.

It’s important to understand that a low rating does not necessarily mean the stock should be avoided. SafetyNet Pro does not measure a stock’s potential for capital gains, only the safety of its dividend.

And its track record has been pretty darn good…

As 2020 winds down (thankfully), let’s take a look at some correct calls made by SafetyNet Pro that would have helped you avoid dividend disasters…

In February, I analyzed Invesco Mortgage Capital (NYSE: IVR).

I pointed out that the company’s recent history of paying its dividend was strong. In fact, it had raised the dividend for three years in a row. Invesco Mortgage was also generating enough cash to fund the payout.

However, it had a deep… dark… not much of a secret. The company had cut its dividend six years in a row starting in 2010.

That always concerns me. It shows that management will be quick to pull the trigger when times get tough.

And Lawdy, Miss Clawdy, times got tough a few weeks later when the economy ground to a halt because of the pandemic.

The quarterly dividend was slashed from $0.50 per share to $0.02 per share. It was raised to $0.05 per share in the most recent quarter, but it is still 90% below where it stood at the beginning of the year.

Prior to the cut, I determined that the company’s then-11% yield was not worthy of forgiveness. My doubt was well-placed, and its “F” dividend safety rating was well-deserved.

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