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.
In this article, we will analyze the key factors affecting these stocks and their potential outlook.
Photo by Vitaly Taranov on Unsplash
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).
10. Merck & Co., Inc. (NYSE:MRK)
Annual dividend yield: 3.76%
Ex-Dividend Date: March 17, 2025
Number of Hedge Funds: 88 (2024 Q3)
Quarterly dividend amount: $0.81
Merck & Co., Inc. (NYSE:MRK) shares declined in recent days due to growing concerns over the patent expiration of Keytruda, a cancer therapy that accounts for 45% of its total revenue. Keytruda, which generates $25 billion in sales for Merck, was first approved by the FDA in 2014 to treat cancer, which is set to expire in 2028. Furthermore, Summit Therapeutics’ ivonescimab and ImmunityBio’s Anktiva are rising in the market as a viable alternative for Keytruda. Meanwhile, its other drug, GARDASIL is facing a regulatory crackdown in China, which in turn leads to a negative outlook on the stock.
Merck & Co., Inc. (NYSE:MRK)’s dividend yield is currently around 3.71%, and the company has demonstrated a commitment to increasing its dividend annually. The collective consensus about this drug remains moderately negative among the analysts, as Bernstein SocGen Group slashed their target from $110 to $95.
9. HP Inc. (NYSE:HPQ)
Annual dividend yield: 3.49%
Ex-Dividend Date: March 12, 2025
Number of Hedge Funds: 43 (2024 Q3)
Quarterly dividend amount: $0.29
The global PC market has been declining for a while, making up a significant portion of HP Inc. (NYSE:HPQ)’s revenue. The 2024 fiscal year sales volume has decreased by 0.3% compared to 2023, and it is expected to have a significant impact on the EPS of the company for the 2025 fiscal year as the analysts have reduced the projected EPS from $0.85 to $0.70-$0.76. In addition to that, the company is facing significant pressure from its competitors, who are taking up a substantial percentage of its market share in the PC and PC components industry. For instance, Canalys reports that HP Inc. (NYSE:HPQ)’s global PC market share has decreased from 21.5% in 2023 to 20.7% in 2024.
As a result, the stock price of HP remained stagnant over the last 6 months, declining over 2%. Despite the not-so-favorable investor sentiment, HP Inc. (NYSE:HPQ) remains committed to providing a strong dividend yield of 3.5%, compared to the technology sector average of 1.37%, and maintains a balanced payout ratio of over 30%.
8. The Williams Companies, Inc. (NYSE:WMB)
Annual dividend yield: 3.62%
Ex-Dividend Date: March 14, 2025
Number of Hedge Funds: 38 (2024 Q3)
Quarterly dividend amount: $0.50
The Williams Companies, Inc. (NYSE:WMB), an energy company based in Tulsa, Oklahoma, noted a 1.41% decrease in its stock over the past month due to a dip in natural gas stocks caused by milder December weather forecasts, which comes as a surprise since Williams has recently celebrated its 52nd anniversary of consecutive dividend payments. The company also recorded a strong performance of 68.7% return over the previous year.
The Williams Companies, Inc. (NYSE:WMB) has a forward payout ratio of 86.75%, distributing most of its earnings to shareholders and strengthening its commitment towards stable income returns. The company has increased its dividend consecutively for 9 years. Dividends are paid at quarterly intervals and without default. The average dividend yield in the energy sector stands at 4.24%. With an annual dividend yield of only 3.62%, the payouts of the company may be less competitive.
The market suffers from short-term volatility. However, The Williams Companies, Inc. (NYSE:WMB) makes quick price recoveries, averaging only 7.6 days, suggesting strong investor confidence. However, macroeconomic trends like the increasing inflation rate in 2025 may favor a more stable energy market, adding to the positive side of the company’s long-term outlook.
The Williams Companies, Inc. (NYSE:WMB) ranks well in income stability and long-term growth potential, thus remaining a top preference for investors focused on dividend payouts.
7. The Scotts Miracle-Gro Company (NYSE:SMG)
Annual dividend yield: 3.98%
Ex-Dividend Date: February 21, 2025
Number of Hedge Funds: 28 (2024 Q3)
Quarterly dividend amount: $0.06
The Scotts Miracle-Gro Company (NYSE:SMG) declined by over 5% in the last few trading days following its decision to separate its hydroponics subsidiary, Hawthorne Gardening Company, due to issues with federal legalization. Chief Executive James Hagedorn made the following comment about that:
“We believe that moving Hawthorne out of Scotts Miracle-Gro is better for everyone. For our shareholders, this would eliminate the volatility of the cannabis sector and generate a significant uplift in gross margin.”
James Hagedorn believes that separating from the cannabis business would increase the P/E ratio of the stock, clearly establishing what the company’s equity represents. However, the investors share a mixed reaction to this decision, as some felt that there could be potential risks and uncertainties associated with the separation. In contrast, others see this as a strategic decision that would enhance the valuation of The Scotts Miracle-Gro Company (NYSE:SMG).
6. Rayonier Inc. (NYSE:RYN)
Annual dividend yield: 4.32%
Ex-Dividend Date: March 17, 2025
Number of Hedge Funds: 20 (2024 Q3)
Quarterly dividend amount: $1.09
Rayonier Inc. (NYSE:RYN) declined by almost 13% in 1 month. The stock price increased by 5.6% after the results were announced, but all the post-results earnings were wiped out in the consequent trading sessions. The 5.6% surge is the result of an impressive EPS of $0.27, which is $0.08 higher than the analyst estimate of $0.19.
The recent decline in share prices is due to a multitude of factors, including a 3% decline in Southern Timber harvest volumes and a 15% drop in Southern Timber stumpage prices. The declining interest in the real estate market is also seen as a major contributor to the negative investor sentiment in the recent trading days. Furthermore, RBC lowering the Rayonier Inc. (NYSE:RYN) price target to $30 from $33 has also caused the prices to decline.
Despite the momentary negativity, Rayonier Inc. (NYSE:RYN) is regarded as a dependable stock that has a unique portfolio of real estate and timber assets, providing long-term value through sustainable land management and strategic dispositions.
5. Nexstar Media Group, Inc. (NASDAQ:NXST)
Annual dividend yield: 4.88%
Ex-Dividend Date: February 12, 2025
Number of Hedge Funds: 27 (2024 Q3)
Quarterly dividend amount: $1.86
Nexstar Media Group, Inc. (NASDAQ:NXST), an American media giant, experienced a decline in its stock price of almost 10% in the past year. Hedge fund holdings went down from 34 in the 2nd quarter of 2024 to 27 in the 3rd quarter, signaling the loss of interest among hedge fund holders.
However, the company’s healthy dividend culture gives hope. With a solid payout ratio of 28.23%, Nexstar Media Group, Inc. (NASDAQ:NXST) distributes close to one-third of its earnings as dividends to shareholders. Perry Sook, the Founder, Chairman, and Chief Executive Officer of the company, stated the following:
“Nexstar’s twelfth annual dividend increase highlights the significant free cash flow of our businesses and capital allocation policies which have consistently demonstrated our commitment to delivering increased returns to our shareholders. Our industry leadership and operating practices combined with the 2025 cash dividend increase, opportunistic share repurchases, debt reduction, and potential growth M&A are key components in our strategies to enhance shareholder value.”
Nexstar Media Group, Inc. (NASDAQ:NXST) also outperforms the communication sector with an annual dividend yield of 4.88 %, which is more than the industry average of 2.62%. Despite a decline in stock price and hedge fund interest, the strong dividend policy of the company contributes to shareholder confidence alongside capital strategies.
4. Northern Oil and Gas, Inc. (NYSE:NOG)
Annual dividend yield: 4.90%
Ex-Dividend Date: March 28, 2025
Number of Hedge Funds: 26 (2024 Q3)
Quarterly dividend amount: $0.45
The stock price of Northern Oil and Gas, Inc. (NYSE:NOG), a leader in the energy industry, saw a decline of 10% in the past month. The company has heavily focused on acquisitions and joint ventures in recent years, leading to expensive investments. The acquisition of XCL assets with SM energy cost Northern Oil and Gas $510 million. These investments were financed using debts, causing its leverage to shoot up. The increased leverage has strained the company’s financials as the interest expenses continue to grow.
With share buyback, Northern Oil and Gas, Inc. (NYSE:NOG) has declared a cash dividend of $0.45 per share for the first quarter of 2025, which marked a 12.5% increase year over year. The increase suggests a consistency in the shares of the company as a solid option for dividend investors despite the recent decline.
With the energy sector generating an average dividend yield of 4.24%, Northern Oil and Gas, Inc. (NYSE:NOG) surpasses it with an annual dividend yield of 4.90%. The analysts have a positive outlook for the company but, at the same time, recommend keeping an eye on the debt levels of the company.
3. United Parcel Service, Inc. (NYSE:UPS)
Annual dividend yield: 5.76%
Ex-Dividend Date: February 18, 2025
Number of Hedge Funds: 45 (2024 Q3)
Quarterly dividend amount: $1.64
United Parcel Service, Inc. (NYSE:UPS) declined 8.5% in the past month amid growing concerns over declining package volumes after the company announced its plan to reduce its business with Amazon Business, which makes up 11.8% of UPS’ total revenue of $91.1 billion. In an interview with Bloomberg Television, Carol Tomé, The CEO of United Parcel Service Inc., stated that:
“They are our largest customer, but they are not our most profitable customer.”
Despite being the top customer, the margin earned from the Amazon business is very meager. Therefore, United Parcel Service, Inc. (NYSE:UPS) aims to move toward more profitable delivery options as they target higher margin deliveries such as express shipping, B2B shipping, and high-value goods shipments. The stock price declined as a result of this decision, as the investors believed that lost volume could affect the overall revenue and the valuation of the company.
United Parcel Service, Inc. (NYSE:UPS) has a history of consistent dividend growth, having maintained it for over 16 years, and remains one of the favorites among dividend investors. The following strategy caused some concern among investors and analysts alike on this logistics giant.
2. Ford Motor Company (NYSE:F)
Annual dividend yield: 6.51%
Ex-Dividend Date: February 18, 2025
Number of Hedge Funds: 36 (2024 Q3)
Quarterly dividend amount: $0.15
Ford Motor Company (NYSE:F) has been experiencing a decline in stock prices for a while due to its negative outlook for sales in 2025. The company expects a 15-25% decline in revenue. The stock declined by 5% on Wednesday, February 5, 2025, despite its EPS beating Wall Street estimates. Ford Motor Company (NYSE:F) posted an EPS of $1.48, which is 8.6% higher than the analyst estimates. The company additionally declared a 15-cent special dividend for its investors for the year 2024. However, the revenue of the company failed to meet the expectations.
The decline in the revenue is due to the poor performance of the EV segment, which lost $1.4 billion in the latest quarter and $5.1 billion for the entire year. US President Trump promised $7,500 EV-purchase tax credits in the future, and it could play a significant role in dictating the performance of the stock in the coming months. Furthermore, the proposed 25% tariffs on Mexican and Canadian imports can have a substantial impact on the revenue of Ford Motor Company (NYSE:F) as the company relies majorly (almost 30% to 50%) on imports from those two countries. The overall outlook on the stock remains negative among analysts, with a 2025 EPS estimate adjusted to $1.30 from $1.80.
1. 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 The Western Union Company (NYSE:WU) ranks first on our list of the dividend stocks that are declining. 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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