It's no secret that more dividend-paying stocks have been downgraded than upgraded this year. Now is not the time to hold onto stocks with slowing revenue or decreasing margins. Today we are highlighting six well known names that yield 2% or more and have been downgraded in February. It might be time to reconsider owning these dividend payers.
MKM Partners downgraded Merck to neutral on February 3, and set a price target of $40 per share. MKM based the downgrade on valuation and poor earnings prospects for the next two years. MRK has a dividend yield of 4% and has been paying dividends since 1935. It has increased the dividend in 2012 but currently has a payout ratio over 100%.
Newmont Mining (NEM)
Stifel Nicolaus downgraded Newmont Mining to a hold on February 1, 2012. It cited reduced growth prospects as the reason for the downgrade. NEM has a dividend yield of 2.29% and has been paying dividends for over 75 years. It doubled the dividend in 2011 from $.50 to $1.00 but still has a low payout ratio of 21%.
Exxon Mobil (XOM)
Argus downgraded Exxon Mobile on February , to a hold citing non favorable production mix toward gas. Jim Cramer has also been negative on Exxon lately because of its slow growth and lack of innovation. XOM has a dividend yield of 2.2% and has increased its dividend for 29 consecutive years. Their payout ratio is a low 22%.
Healthcare Realty (HR)
UBS downgraded Healthcare Realty on February 1, to a sell and set a price target of $16 per share. UBS cited valuation. Bairds also recently downgraded HR on January 27, and Wells Fargo recently downgraded the sector. Healthcare Realty is a REIT with a dividend yield of 5.7%. It has been paying dividends since 1993. It cut the dividend in 2010 and has not increased it since.
Stifel Nicolaus downgraded Mattel on February 1, to a hold but did not provide a new price target. It said the stock was overvalued and was facing an increase in competition. MAT has a dividend yield of 2.9%, which is well below the five-year yield average of 3.9%. The five-year dividend growth rate is 7.38% and has been paying dividends since 1990. It switched from annual to quarterly distributions in 2011.
Barclays downgraded Sunoco to equal weight on February 1, and set a price target of $37 per share. Barclays based the downgrade on valuation saying that it didn't think SUN has much upside from its current levels. Sunoco has a dividend yield of 2.08%, which has been all over the place in recent years. So far in 2012 it has raised the dividend for what looks to be a 25% increased compared with 2011.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.