What Is A Dividend Disaster?

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What Is A Dividend Disaster?
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• Hi, My name is Aaron and Im with Dividend Stocks
  Research, today were reviewing our recently
  published article

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• What Is A Dividend Disaster?

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• I never thought my friend Large Lou Sapino would
  be a credible source of good dividend stocks
  investing wisdom. We get together a few times a
  year when he drags me into Dannys on Orange
  Avenue in Coronado, California.

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• Ill nursea beer and hell be drinking vodka
  Actually, hes lecturing me on vodka. Its his
  passion.
• Lou isnt much of a drinker. Hes more of an
  analyst, and an historian.

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• He told me the first Russian vodka was inspired
  by visitors from Genoa. He insists that despite
  Americas current infatuation with Frances Gray
  Goose, only Russian vodka really matters.

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• So the last time we got together, Lou asked me
  about Russian stocks. He had just come back from
  a trip to Moscow and wanted to know if he should
  buy any Russian dividend stocks.

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• Heres more or less what I told Lou...

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• The Highest Dividend Yield Stocks To Avoid Come
  From Russia

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• I told Lou I could see why he was tempted,
  especially with a stock like Mobil'nye
  Telesystemy MBT.
• It pays a dividend that stretches from St.
  Petersburg to Siberia. The last I checked, it
  was just shy of 11.

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• And Mobil'nye Telesystemy isnt a fly by night
  outfit, at least not by Russian standards. Its
  the countrys largest cell phone company, with
  100 million mobile subscribers.

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• By comparison, Verizon VZ, the largest U.S.
  carrier, has 102 million subscribers. But the
  Mobil'nye Telesystemy stock is a heartbreaker.
  Take a look at whats been happening the past few
  years...

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• Somehow, the stock manages to get recommendations
  from people who should know better. On August
  19th, analysts at CitiGroup announced they were
  smitten with the company, and upgraded it to a
  Buy.

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• Lazard Asset Management, JP Morgan Chase, and
  Vanguard each own millions of shares.So why am I
  so sour on a stock that some pretty smart people
  want to own? Why am I down on one of the highest
  dividend stocks?

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• High yield-stocks are home wreckers. At MBT, the
  balance sheet is a mess. The numbers just dont
  work. Even if you factor out all the chicanery,
  mischief, and shenanigans in the Russian
  financial markets...

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• Even if you believe in the data the company
  reports, youre looking at...

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• The Molotov Cocktail Of Dividend Stocks

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• Revenue in 2014 went up in flames...6.8 billion
  compared to 12.1 billion in 2013. Net income
  took an even uglier turn for the worse, skidding
  from 2.4 billion to just 8.6 million.

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• When your revenues arent growing, you cant grow
  the dividend. The math doesnt work any other
  way. Not unless you rob Igor to pay Ivan.

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• The company is sitting on 4,16 billion in
  long-term debt. And as for long-term prospects,
  I cant find a single reason why we should
  believe business is about to turnaround.

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• Its not too hard to see Mobile Tele Systems
  following in the footsteps of another Russian
  stock nightmare. Three years ago, VimpelCom VIP
  paid a dividend of 18.87 . Today, the yield is
  1.38.

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• What went sideways with VimpelCom? In 2014, it
  admitted that sales wouldnt hit its optimistic
  early projections. Then big investors bailed.

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• The high-flier peaked in October, 2013at 14.31.
  Earlier this year, it traded at 3.60.
  Shareholders watched their fat dividend virtually
  vanish as the stock price melted down.

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• Russia doesnt have a monopoly on stories like
  this. Dividend stocks with big promises that
  turn into big problems are traded on exchanges
  from Mexico City to Mumbai. And definitely in New
  York.

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• But it seems you run into your unfair share of
  these high dividend stocks in Russia. One of
  todays dividend darlings from Russia is CTC
  Media, CTCM, which pays a yield of 42. The
  dividend payout ratio is 304.

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• Talk about living beyond your means...this ratio
  means CTC pays three times as much to pay the
  dividend as it earns in revenue.

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• For every dollar the company earns, it needs to
  scrounge up another two just to pay the dividend.
  How long do you think this party lasts? Its just
  a matter of time. Take a look at the change of
  fortune for CTC...

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• When CTCs stock price started falling in 2014,
  it didnt cut the dividend. In fairness to the
  company, a falling stock price isnt a reason to
  cut the dividend. But falling income is, and the
  income at CTC Media has been skidding.

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• When youre sizing up a dividend stock, whether
  its from Moscow or Memphis, get beyond the high
  yield. Look deeper. See whats happening with
  net income, because thats what should pay the
  dividends.

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• Ideally, you want to find a company where net
  income is growing, and where the profit margins
  are growing as well.
• These Russian companies that depend on homegrown
  revenue just dont deliver.

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• And dont forget what the strength of the U.S.
  dollar relative to Russias ruble has done. Its
  made Russian companies cheaper to buy. At first
  glance, this looks just as appealing as a high
  yield.

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• Russian companies that dont depend on homegrown
  revenue can be a different story. Theres
  recently been an upside when the company exports
  what it sells.

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• When you pay for labor and raw materials in
  rubles, then get paid for what you sell in
  dollars, youre sitting in the currency catbird
  seat.

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• But no matter where its headquartered or what it
  does, buying a company in trouble - at any price
  - usually doesnt work out too well.

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• And stocks with the highest dividends just lure
  you in with a sweet-sounding promise.
• Youre better off investing in a bottle of
  Russian Standard Vodka.

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