3 Underperforming Dividend Stocks to Sell Now

Dividend stocks offer steady cash flow and the potential to generate long-term earnings. However, “potential” is the key word, and some actions do not live up to expectations. While quarterly dividend payments are good, they don’t mask poor performance. Some dividend action followed S&P 500 for several years. Although the returns are higher than most stocks, this is not enough to justify a good investment.

It is also not enough to justify an investment if the corporation is a household name. Some household names have stagnated and are relying on the iconic character of their brands rather than launching innovative products that attract new customers. This dynamic presents several obstacles for shareholders looking to beat the market.

All of these stocks have underperformed the major index for several years. Each of these stocks is also down year-to-date and has unimpressive financial growth. Wondering which dividend stocks investors might want to cut from their portfolios? These are the three underperforming dividend stocks to sell before losses compound.

Nike (NKE)

Source: TY Lim / Shutterstock.com

NIKE (NYSE:NKE) has a dividend yield of 2% and a P/E ratio of 20. While these numbers look decent on the surface, investors should pay attention to the company’s recent financial performance. Nike only offered a 1% annual revenue increase. China was the largest region with annual growth of 3%, but that’s not as good as it sounds. Many American companies have lost market share in China as consumers have turned away from foreign corporations. This trend may affect Nike’s revenue growth in the region going forward.

Low revenue growth makes it no surprise that Nike has consistently trailed the market. Shares are down 26% year-to-date, while they are down 2% over the past five years. Nike managed to increase its quarterly dividend by 9% annually. Investors now receive a quarterly payout of $0.37 per share. It’s still not enough to offset the stock’s capital losses. These losses should continue as competitors gain more market share.

Starbucks (SBUX)

Source: Natee Meepian / Shutterstock.com

Consumers retreated on them Starbucks (NASDAQ:SBUX) purchases amid rising inflation. Revenue fell in two consecutive quarters last year, including a 1% annual decline in the third quarter of fiscal 2024.

Global comparable sales fell 3 percent from last year, with China a major drag on Starbucks’ earnings. The company has 7,306 stores in China, making it the company’s largest region outside the United States. Revenue in China fell 11 percent from last year, reflecting a trend of U.S. companies struggling to gain and retain market share in the country. This decline is even worse because Starbucks has increased its number of Chinese stores by 13% compared to last year.

Starbucks’ lost ground in China could continue and hurt earnings for several quarters, if not years. Inflation also hurt US sales and global sales outside of China. Starbucks needs its other markets to grow and stay strong to counter declining interest in China. So far, this is not happening.

Comcast (CMCSA)

Source: Shutterstock

Comcast (NYSE:CMCSA) is the fourth-largest broadcast and cable company, but its household name status doesn’t make the stock promising. The stock is down 11% year-to-date and has shed 9% of its value over the past five years. A 3.17% yield doesn’t soften the blow of underperformance, and financial stagnation suggests limited growth or more downside.

NBC’s parent company reported a 2.7 percent drop in annual revenue in the second quarter. Meanwhile, net income was down 7.5% from last year. While Comcast may receive a short-term earnings boost from the Olympics, the trend of low or declining annual revenue growth has become commonplace.

Comcast and other big media firms are adapting to the streaming industry, but the results aren’t all that exciting. Yes, Peacock posted a 28% year-over-year revenue increase in the second quarter. That’s a good growth rate, but total revenue came in at just $1.0 billion this quarter. That’s just a small fraction of the company’s $29.7 billion in Q2 2024 revenue.

Streaming is a small percentage of total revenue, giving it little impact on overall revenue growth figures. Peacock reported an adjusted EBITDA loss of $348 million in the quarter, compared with net income of $3.93 billion. Adjusted EBITDA losses are usually more favorable, so it’s easy to assume that Peacock had a much larger net loss than $348 million.

At the time of publication, Marc Guberti did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the writer, with reservation InvestorPlace.com Publishing Guide.

At the time of publication, the responsible editor had (either directly or indirectly) no position in the securities mentioned in this article.