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Dividend Stocks to Sell in February Top Dividend Stocks to Sell in February

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    Top Dividend Stocks to Sell in February

Investing in high-yield stocks can sometimes feel like chasing pennies in front of a steamroller. The risk of potential capital losses lurks behind the allure of steady returns. High-yield dividend stocks often come with an increased risk of dividend cuts and poor operating performance. This can lead to sudden declines in share value and yield. Here are seven examples of dividend stocks to sell for these very reasons.

Big Five Sporting Goods (BGFV)

A photo of the exterior of a Big 5 Sporting Goods store in Redwood City, California.

Source: Michael Vi/ShutterStock.com

Big Five Sporting Goods (NASDAQ:BGFV) cut its quarterly dividend by 50% last year. Despite this reduction, the forward yield still stands at 9.16%. However, the company’s preliminary results reveal a double-digit decline in sales and a potential net loss, primarily due to expected losses in Q4 2023. With uncertainty looming, caution is advised with BGFV stock. Another dividend cut could trigger substantial share declines.

FAT Brands (FAT)

East Ann Arbor store front of Elevation Burger resturaunt

Source: Susan Montgomery via shutterstock

FAT Brands (NASDAQ:FAT) has been experiencing net losses, raising concerns about the sustainability of its 6.13% dividend. The stock recently dipped to around $8 per share, prompting doubts about its long-term financial health. This raises a red flag for investors considering FAT as a dividend stock.

Global Net Lease (GNL)

sheet of paper marked

Source: Shutterstock

Global Net Lease (NYSE:GNL) offers a forward yield of 17.57%, which may seem enticing. However, doubts loom about the real value of GNL’s property portfolio. Continual price declines may outweigh the high dividend yield. Uncertainty regarding the state of commercial real estate casts a shadow over GNL as a dividend stock.





The Dividend Stocks You Need To Sell

The Dividend Stocks You Need To Sell

Kohl’s (KSS)

Image of Kohl's logo on a Kohl's store

Source: Sundry Photography/Shutterstock.com

If you’re on the lookout for troubled dividend stocks, Kohl’s (NYSE:KSS) might just be the type of stock you should steer clear of. Wolfe Research’s Chris Senyek has sounded the alarm on this department store giant, citing a potential high risk of a dividend cut. Kohl’s finds itself among the big-name stocks facing this unsettling prospect, given Senyek’s analysis indicating that the company will need to funnel 78% of its free cash flow to maintain its 50 cent quarterly dividend, which yields a rather tempting 7.26%. However, this thin margin could spell trouble if unforeseen economic challenges, such as a recession, materialize. Additionally, Kohl’s history with dividend adjustments is not comforting, having suspended dividends during the Covid lockdown and currently sitting below its pre-Covid payout rate.

3M (MMM)

3M logo on top of a corporate building. MMM stock

Source: JPstock / Shutterstock.com

Bouncing over to another company, 3M (NYSE:MMM) has managed to settle a couple of high-profile lawsuits, but contrary to what one might think, this industrial conglomerate’s embattled shares are not presenting a buying window, and it’s not owing to the reasons you might expect. Investors might want to think twice about MMM stock due to the company’s heightened risk of slashing its dividends. Despite 3M being a part of the elite club of “dividend kings” that have consistently increased dividends for 64 years, there’s growing concern that this longevity might be facing a premature end. A dividend reduction could free up additional capital for strategic changes, but the announcement could deal a severe blow to share prices, leaving investors in a precarious position.

Annaly Capital Management (NLY)

6 Monthly Dividend Stocks to Buy

Source: Shutterstock

The cautious approach of the Federal Reserve to cutting interest rates is pivotal in why Annaly Capital Management (NYSE:NLY) finds itself on the list of dividend stocks investors should avoid. While the mortgage REIT’s nearly 14% forward dividend yield might catch the eye of income-seeking investors, the company’s shares have been lackluster in a climate of high interest rates. These high rates have squeezed Annaly’s net interest margins and led to substantial unrealized losses in its mortgage-backed securities portfolio. The outlook for lower rates and a housing market revival in 2024 might alter Annaly’s fortunes, but should these expectations go unmet, a dividend reduction could be on the horizon.

Whirlpool (WHR)

the Whirlpool (WHR) logo on a corporate building

Source: Grand Warszawski / Shutterstock.com

Last but by no means least, Whirlpool (NYSE:WHR) has also found itself on Chris Senyek’s roster of potential dividend cut stocks. Despite Whirlpool’s $1.75 per share in quarterly dividends returning a modest 6.47% forward yield and representing just 44% of estimated 2024 free cash flow (well below other stocks on the watchlist), the company’s prosperity is closely tethered to lowered interest rates and a housing market recovery. If these stars fail to align, Whirlpool could be left in dire straits, potentially compelling the company to slash its dividend. This scenario could precipitate a large selloff as investors, who have flocked to WHR stock for its attractive yield, are met with unwelcome news.

On the date of publication, Thomas Niel did not hold (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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.