The Worst Dividends of 2016

Posted On December 7, 2016 8:42 pm

Just because a company has a dividend does not always mean that the company is a desirable investment. While every company can hit rough patches, companies with dividends, especially high-yield dividends, can see their share prices drop big time if there is a whiff of trouble that could lead to an eventual cut to its payout. 2016 had its fair share of lousy dividend stocks, but here are the five that were real stinkers this past year, why they did so poorly, and whether they present any kind of investment opportunity for investors that want to scrape the bottom of the value barrel.

The unlucky five

Company Dividend Yield Total Return (YTD)
Teekay Tankers (NYSE: TNK) 4.7% (60%)
Alon USA Partners (NYSE: ALDW) 6.3% (57.5%)
StoneMor Partners (NYSE: STON) 15.8% (65.1%)
Calumet Specialty Products Partners (NASDAQ: CLMT) N/A (dividend suspended) (75.2%)
FerrellGas Partners (NYSE: FGP) 6.7% (60.5%)

Data source: S&P Global Market Intelligence. YTD = year to date.

With the exception of StoneMor Partners, all of these companies are deeply tied to the oil and gas industry in some way or another. While the decline in oil and gas prices and the reverberations it has sent through the entire industry did likely have an impact on the commodity companies on this list, there were bigger issues that caused their share prices to crater.

An oversupplied market hitting at just the wrong time

In December 2015, Teekay Tankers announced a new dividend policy in which it would pay out 30% to 50% of its quarterly adjusted net income, with a minimum dividend payment floor of $0.03 per share. At the time of the announcement, it looked like investors were going to cash in big time, as the new policy led to a 400% increase in its dividend from the prior quarter.

The problem for the company, though, was that the market for oil tankers deteriorated throughout this past year. Several new oil tankers came online this year while overall oil demand wasn’t as robust as anticipated, which led to an oversupply of tankers. As a result, the company’s dividend payment dwindled in each proceeding quarter until Teekay Tankers’ most recent dividend was back at its $0.03-per-share floor.

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Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I currently write for both Seeking Alpha, Simply Safe Dividends, and DividendSensei.com My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams, and enrich their lives. With 22 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams. I'm currently on an epic quest to build a broadly diversified, high-quality, high-yield dividend growth portfolio that: 1. Pays a 5% yield 2. Offers 7% annual dividend growth 3. Pays dividends AT LEAST on a weekly, but preferably, daily basis