Dividends can be a fabulous income source for investors - except that they are not guaranteed. If the economy slows or the company experiences a crisis, its board of directors might elect to cut or suspend the dividend. (Be sure to read Is Your Dividend At Risk? to learn of some telling factors that can help you answer this question and avoid losses.)
Due to the current economic crisis, companies of all stripes have either announced plans to cut their dividend or already suspended it. Two big names that come to mind are Macy's (NYSE:M), which announced plans to cut its dividend earlier this year, and the New York Times (NYSE:NYT), which recently announced plans to suspend its dividend.
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Five Over 5%
Following are companies that sport a forward annual dividend yield of 5% or greater and may be worthy of further research.
|Company||Market Capitalization||Forward Annual Dividend Yield (%)|
|Barnes & Noble
|Data as of market close March 3, 2009 from the Investopedia Stock Screener.|
Let's Peruse Barnes & Noble
Like many companies these days, the well-known book retailer has seen its shares get pummeled. The stock is about 50% off its 52-week high of $33.64. Nevertheless, I think it's worth a closer look.
Barnes & Noble has several things going for it. One is that it has a big physical presence. According to a recent release, as the world's largest bookseller and a Fortune 500 company, Barnes & Noble operates 799 bookstores in 50 states. A physical presence is important because it allows consumers to browse its selections firsthand.
For those who prefer to buy books on the web, Barnes & Noble offers that option as well. But again, its stores are where most of the action is. In its last 10Q the company pointed out that more than 80% of its sales came from stores.
High Forward Annual Dividend Yield
I'm also intrigued by its forward annual dividend yield of nearly 6%. Again, there is no guarantee that dividends will continue to be paid. But in this market, that can be a big lure for investors. Earlier this month Barnes & Noble's board declared a 25-cent quarterly dividend payable March 31.
Although the economy is struggling and competition with big name players like Borders (NYSE:BGP), Books-A-Million (Nasdaq:BAMM) and Amazon (Nasdaq:AMZN) remains stiff, Barnes & Noble is expected to earn $1.46 a share in the year ending February 2009 and $1.10 a share in the year ending February 2010. That's pretty cheap in my book (pun intended) given that the stock trades just under $17.
Although dividends are never guaranteed, I like to search for companies that sport a high forward annual dividend yield because these companies may be worth further research.
Read our related article, The Importance Of Dividends, to learn more about this lucrative distribution.