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When the market starts looking ready to make a strong correction one of the best things an investor can do is review their positions to make sure their investments aren't on what I call the Dividend Hit List.

What's the Dividend Hit List?

The Dividend Hit List is a list of dividend stocks that have outperformed the S&P 500 year-to-date and also hold a higher P/E valuation than the market but are operating with weak fundamentals.

What type of weak fundamentals am I focused on?

Specifically, stocks who have posted negative EPS growth trends over the last year and who offer a dividend but operate with a current ratio less than 1 .

The risk with holding these dividend stocks, in my opinion, is that they have a higher than average probability of falling hard if the market makes a strong correction.

Why?

When a stock has a higher P/E ratio this implies that investors expect the company's earnings to grow in the future. When the dividend stock's P/E ratio is higher than the market this means that investors assume its future earnings will outperform that of the S&P 500.

Now a high P/E valuation, especially one that is higher than that of the market, is pretty tough to justify when the company is posting negative EPS growth over the last year.

As well, if the stock offers a dividend but has a current ratio of less than 1, how reliable can those future dividend payments really be?

Not that reliable in my opinion because they company can't even cover all its obligations if they came due at once.

As well, the stocks I identified below have also outperformed the S&P 500 YTD.

I believe the stocks listed below are overvalued and will likely sell off aggressively should the market enter a correction phase.

These stocks were identified by screening for dividend stocks that have outperformed the S&P 500 YTD, have a higher PE valuation than the S&P 500, and who have posted negative EPS growth over the last year while operating with a current ratio of less than 1.

1. Dominion Resources, Inc. (D)

Dominion Resources, Inc. engages in producing and transporting energy in the United States. At this time Dominion Resources, Inc. has a market cap of $38,553M and a P/E ratio of 61.35 but has posted negative earnings growth of -77.11% over the last year.

Currently, Dominion Resources, Inc. offers a dividend yield of 3.39% but operates with a current ratio of .81. Given that Dominion Resources, Inc. has a current ratio is .81 this is a liquidity red flag according to fundamental analysis.

As well, Dominion Resources has risen by 2.67% YTD while the S&P 500 has fallen 3.04% YTD.

Analyst Note:

On January 14, 2014 UBS upgraded Dominion Resources, Inc. from a HOLD to a BUY with a price target increase from $63 to $72.

2. NextEra Energy, Inc. (NEE)

NextEra Energy, Inc. engages in the generation, distribution, and sale of electric energy in North America. At this time NextEra Energy, Inc. has a market cap of $37,422M and a P/E ratio of 20.24 but has posted negative earnings growth of -.67% over the last year.

Currently, NextEra Energy, Inc. offers a dividend yield of 3.04% but operates with a current ratio of .59. Given that NextEra Energy, Inc. has current ratio is .59 this is a liquidity red flag according to fundamental analysis.

As well, NextEra Energy, Inc. has risen by 1.48% YTD while the S&P 500 has fallen 3.04% YTD.

Analyst Note:

On January 6,2014 Barclays reiterated an Overweight holding but decreases its price target from $94 to $91.

3. Carnival Corporation (CCL)

Carnival Corporation operates as a cruise company all over the world. At this time Carnival Plc has a market cap of $31,796M and a P/E ratio of 27.70 but has posted negative earnings growth of -31.24% over the last year.

Currently, Carnival Plc offers a dividend yield of 2.54% but operates with a current ratio of .35. Given that Carnival Plc has current ratio of .35 this is a liquidity red flag according to fundamental analysis.

As well, Carnival Corporation has only fallen by -1.99% YTD while the S&P 500 has fallen 3.62% YTD.

4. Williams Companies, Inc. (WMB)

The Williams Companies, Inc. operates as an energy infrastructure company. At this time Williams Companies, Inc. has a market cap of $26,572M and a P/E Ratio of 43.48 but has posted negative earnings growth of -14.18% over the last year.

Currently, Williams Companies, Inc. offers a dividend yield of 3.7% but operates with a current ratio of .85. Given that Williams Companies, Inc. has a current ratio of .85 this is a liquidity red flag according to fundamental analysis.

As well, Williams Companies, Inc. is up .8% YTD while the S&P 500 has fallen 3.62 % YTD.

I hope this short list of dividend stocks helps as investors evaluate and re-balance their portfolios for 2014.

Source: 4 Overvalued Dividend Stocks Primed To Fall If The Market Corrects Downward

Additional disclosure: This is not to be construed as direct or indirect investment advice. Investors should always do their own independent due diligence before making any investment decisions.