Consumers have an insatiable appetite for new and better products and services, and they tend to reward the companies that fulfill their desires. However, shifting consumer preferences can erode brand loyalty at even the best-loved companies. When this happens, expenses are slashed and dividends are cut as the formerly high-flying company struggles to remain relevant in the ever-changing consumer culture. Once the dividends start to be cut, yield investors will start to dump the stock,… Read More
Consumers have an insatiable appetite for new and better products and services, and they tend to reward the companies that fulfill their desires. However, shifting consumer preferences can erode brand loyalty at even the best-loved companies. When this happens, expenses are slashed and dividends are cut as the formerly high-flying company struggles to remain relevant in the ever-changing consumer culture. Once the dividends start to be cut, yield investors will start to dump the stock, sending share prices downward. The key to avoiding these “dividend trap” stocks is to look for a weakening fundamental and technical situation when the dividend yield is staying steady or climbing. Here are two stocks that may become “dividend traps” due to the changing consumer landscape. Garmin (Nasdaq: GRMN) This manufacturer and marketer of GPS equipment pays a hefty dividend yield of 5%. Generally, this would be a positive, but in this instance, it signals trouble.#-ad_banner-# The… Read More