We recently published an article titled Why These 10 Dividend Stocks Are Declining? In this article, we are going to take a look at where The Western Union Company (NYSE:WU) stands against the other dividend stocks.
In this article, we will examine 10 companies with high dividend yields and explore the reasons behind declining stock prices.
Companies that pay dividends have been a reliable choice for investors seeking a passive and somewhat stable income. All the stocks in our list today have offered attractive yields, thus satisfying the expectations of these investors. But we have noticed them struggling in recent months.
Broader market conditions, like a 25% tariff on steel and aluminum imported into the US, have led to market volatility. Though the broader market remained unchanged, the Nasdaq composite faced a decline during the past few weeks. These changes are reflected in the price of many high dividend-paying stocks. Some companies are additionally experiencing company-specific challenges. The strategic transition of British Petroleum from oil and gas assets to green energy and divestment, for instance, has led to its underperformance. Comparatively, competitors who were focused on fossil fuels gained preference, owing to the analysts questioning the future dividend sustainability of BP. The shifting investor sentiment also has contributed to the downturn of some of the stocks in our list.
We find it difficult to point out any single sector as a worst-performing sector. The recent macroeconomic trends, inclusive of the inflationary pressures as well as the interest rate adjustments, cause ripples across multiple sectors in the US economy. Some companies have maintained stable payouts proportionately to an increase in their share value. Others face declining share prices because of weaker earnings and reduced interests among the hedge fund holders.
Dividend Aristocrats have historically provided stability and consistent income. They have been a popular choice among long-term investors. In the past few months, however, the stock prices of these companies have declined despite maintaining high dividend yields. The upward interest rates and inflation rates recently pressured some high-yield companies, making it hard for them to sustain dividend increases without debts. Thus, high yields may seem appealing, but it falls in the hands of the investors to assess the ability of these companies to maintain their payouts without jeopardizing financial health.
Our Methodology:
The article includes 10 high-yield dividend stocks experiencing a decline in their prices in the last 1 month. Each company on the list was added after ensuring that they have a market capitalization of over $1 billion and a minimum dividend yield of 2.5%. The article assessed financial sustainability using historical stock performance, dividend payout ratios, and earnings reports. For this list, we scanned Insider Monkey’s database of 900+ hedge funds as of the third quarter of 2024. The final list is ranked according to their dividend yields, as of February 11.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of hands counting bills, depicting the payment services the company offers.
The Western Union Company (NYSE:WU)
Annual dividend yield: 9%
Ex-Dividend Date: Mar 17, 2025
Number of Hedge Funds: 27 (2024 Q3)
Quarterly dividend amount: $0.235
The stock price of The Western Union Company (NYSE:WU) continued its decline, dropping by over 7% in the past three trading days, 17% in the past year, and just over 60% in the past 5 years. Despite the attractive annual dividend yield of 9%, the asset has been losing its value consistently as the analysts share a consensus, “Avoid,” with an average price target of $12.11, indicating an upside of 16%. The target price decreased by 6% compared to last month as the company posted a 3% decline in its 2024 fiscal revenue. Cheaper and faster alternatives, such as PayPal and Wise, have captured significant market share. The company’s high debt limits its ability to invest in new technologies or acquire new companies.
The Western Union Company (NYSE:WU) is also fundamentally weak despite having almost three times higher average yield than the financial industry (3.18%). The average price recovery from the dividend announcement took 14.9 days, further signaling the weak fundamentals and a negative market sentiment regarding the stock. Therefore, despite the attractive dividend yield, investors should be wary of taking a long position in the stock.
Overall WU ranks 1st on our list of the dividend stocks that are declining recently. While we acknowledge the potential for WU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
