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Sunday, October 26, 2008

*Don't Fall Into A Dividend Trap

Prices are falling and yields are rising on dividend stocks. It's a great time to be a dividend investor. That is assuming one of these wonderful stocks you just picked up doesn't do the unspeakable - cut its dividend.

A recent Forbes article listed these four companies as a potential dividend traps:
  1. General Electric (GE) - 6.60% yield
  2. Morgan Stanley (MS) - 5.97% yield
  3. Macy's (M) - 5.52% yield
  4. Nordstrom (JWN) - 3.79% yield
In addition, the article listed Bank of America (BAC), which has already cut its dividend. In the case of General Electric, the company has stated it will freeze its dividend through 2009. These are great times, but we have to be diligent and do our homework before investing.

Disclosure: Long GE. See a list of all my income holdings here.

Tags: [GE] [JWN] [M] [MS]

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