Producing 100% Total Returns From Busted Dividend Stocks

In the early days of the coronavirus pandemic, hundreds of companies slashed common stock dividends. Many saw business operations significantly affected and did not have the cash to pay the previous dividend rate. Others chose to cut dividends as a defense against a suddenly uncertain future. In both cases, income-focused investors were devastated as share prices crashed and dividend payments were slashed.

As business slowly emerge from the uncertainties of early 2020, I have divided the list of high-yield stocks for my Dividend Hunter service into two groups. One is those companies that sustained dividends through the crash. The second group is those companies that cut dividends, but that my research shows can quickly resume higher dividend payments and dividend growth.

While I appreciate the steady and predictable dividends of the first group, at this point in the stock market pricing cycle, I find the second group to be very intriguing. Investors hate dividend cuts, and this group of stocks that reduced dividends remain tremendously out of favor. The investing world continues to look backward and not forward to when dividends will be increased.

As these busted dividend companies reach the point at which they’ll be able to increase dividend rates again, the potential is there to produce 100% total returns over the course of just a couple of years. Here are three stocks that should double as dividends are increased or resumed:

It’s not surprising that the hotel real estate investment trusts (REITs) slashed dividends. Lodging REITs are one REIT sector that participates in the profitability of the properties they own.

In March, RLJ Lodging Trust (RLJ) slashed its quarterly dividend from $0.33 per share down to just one cent per share.

The pandemic and related shutdown forced the closure of half of RLJ’s 103 hotels. During the second and third quarters, 36 of the closed properties reopened.

While the lodging industry still suffers from a lack of business travel, I expect RLJ to start growing its dividend in early 2021.

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Disclaimer: The information contained in this article is neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its ...

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