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7 Dividend Stocks to Avoid in Your Retirement Portfolio

Income stocks and retirement go hand in hand because they are both built for the long term. You don’t buy stocks for their dividends for the short term. They are steady investments that enhance your wealth the old-timey way, slowly over time.

The challenge is to find stocks that can maintain and grow their dividends year after year. If their dividends are solid, their business is likely solid as well, and you’ll also see stock price growth, too.

But there are stocks in special categories — limited partnerships (LPs), real estate investment trusts (REITs), business development corporations (BDCs) — that are structured in such a way that they cut the investor directly in on net profits and can offer tantalizing dividend yields.

However, they can be cyclical, and those dividends may be here one day, gone the next. The seven dividend stocks to avoid in your retirement portfolio are unreliable stocks right now, so keep them out of your long-term plans.

  • Boston Properties (NYSE:BXP)
  • PPL Corp (NYSE:PPL)
  • Energy Transfer LP (NYSE:ET)
  • AT&T (NYSE:T)
  • VF Corp (NYSE:VFC)
  • Equity Residential (NYSE:EQR)
  • Lamar Advertising (NASDAQ:LAMR)

Retirement Stocks to Avoid: Boston Properties (BXP)

Real estate investment trust (REIT) on a black notebook on an office desk.

Source: Shutterstock

Real estate is hot, so why is this REIT on the list? Because it’s the wrong kind of real estate in the wrong places.

Certainly, in this low-interest-rate environment, REITs as a whole have done well. But you don’t judge a stock on how well it does in the good times. It’s how it gets through the bad times that matters most for long-term investors looking toward retirement.

BXP is the largest publicly traded commercial real estate developer in the U.S. It has nearly 200 buildings in Boston, Los Angeles, San Francisco, New York City and Washington, DC.

These major cities were also experiencing an exodus of corporate workforces even before the pandemic. And now it’s worse. Add to that the kryptonite of REITs — rising interest rates — and BXP becomes a REIT that’s looking like shopping mall REITs did a few years ago.

Given that, its 3.7% dividend may look tempting now, but the stock is already pulling back.

The stock gets a D rating in my Portfolio Grader.

PPL Corp (PPL)

telephone poles and power lines with sunset as backdrop

Source: Shutterstock

With a 5.72% dividend and utility businesses in the U.K., as well as boomtown Louisville and central Pennsylvania, this would seem like a great stock for buy-and-hold investors looking toward retirement cash.

But the U.K. business is up for sale, and rising rates aren’t good for utilities because it’s a cash-intensive business, keeping everything running, reliable and safe. That means rising rates aren’t going to help PPL.

And if it sells its U.K. business, that’s going to affect cash flow, which may have a negative effect on its generous dividend. If it has to cut its dividend, that is usually like blood in the water with investors.

This isn’t the time to be blinded by PPL’s risks just for the sake of its alluring dividend.

The stock gets a D rating in my Portfolio Grader.

Energy Transfer LP (ET)

A magnifying glass zooms in on the website for Energy Transfer (ET).

Source: Casimiro PT / Shutterstock.com

As a limited partnership, ET treats its shareholders (technically unitholders) as owners and by law pays them out of net profits using a stock dividend. Given the comeback in oil stocks recently, it’s not surprising that ET’s current dividend is 6.11%.

That’s certainly tempting, but there’s plenty of risk and volatility that comes along with that. ET is a leading midstream oil company, which means it makes its money in pipelines, moving oil, natural gas and natural gas liquids from fields to refineries and distribution centers.

Do you remember Standing Rock? That was an ET-owned pipeline trying to get across the Sioux Nation. It’s still an issue. And then there’s the current ransomware attack on the Colonial Pipeline on the East Coast. The point is, there are risks here.

It’s a big company, moving about 30% of the energy patch bounty around the nation. But LPs and their dividends aren’t something you can count on, and the industry is cyclical, which isn’t exactly what you want in a retirement stock.

The stock gets a D rating in my Portfolio Grader.

AT&T (T)

a photo of the AT&T office building

Source: Roman Tiraspolsky / Shutterstock.com

It seems odd to see the old Ma Bell on this list given its long reputation as a blue-chip company. However, T isn’t the company of old.

As a matter of fact, you could make the argument that its legacy is precisely what has put it in the predicament it’s in today. It thought its primacy was going to continue when the mobile market exploded, given its powerful position in the telecom world.

But more aggressive competitors started going after AT&T’s dissatisfied base, and today it’s losing ground.

What’s more, when it bought TimeWarner Media it wasn’t prepared for entering the new digital content and streaming sector. It has been an expensive lesson.

It’s crazy to think this company with a $230 billion market capitalization and 6.5% dividend is a risky choice for retirement money, but that’s where we are.

The stock gets a D rating in my Portfolio Grader.

VF Corp (VFC)

Image of a giant boot in the street surrounded by people.

Source: rblfmr / Shutterstock.com

On any given day, you likely see a brand or two that belongs to VF Corp. It has been making apparel since 1899, and today owns brands like Dickies, Supreme, The North Face, Jansport, Vans, Timberland and others.

That seems like a pretty solid portfolio of brands covering work, outdoors and upscale leisurewear, and it is. But it’s also competing in a very competitive, low-margin market for the most part. And it’s at the will of consumer spending.

Year to date, the stock is slightly underwater. And its 2.3% dividend is solid, for now. But any disruption with suppliers in China or a weakening dollar could hurt margins.

There are plenty of other stocks without these risks, with better payouts.

The stock gets a D rating in my Portfolio Grader.

Equity Residential (EQR)

Source: IgorGolovniov / Shutterstock.com

As its name implies, EQR is a residential REIT focused on apartment buildings in major cities around the country — Washington, DC; New York; Denver; Seattle; southern California — to name a few.

The trouble is, the pandemic has moved the country online, and work-from-home solutions may well become part of the new work reality for some. Hybrid work schedules will make it less important to be working in a dense, loud, expensive city.

That means current rents and building fees may take a hit to keep units full. And given current unemployment rates, there may be tenants that just don’t have the means to live downtown.

The stock is up 25% year to date, and it has a 3.3% dividend. There are much better REITs out there at this point.

The stock gets an F rating in my Portfolio Grader.

Lamar Advertising (LAMR)

Dillsburg Veterinary Center billboard

Source: Andriy Blokhin / Shutterstock.com

Forget about digital advertising, LAMR has been in the advertising business since 1902. But its business is about 200 billboards around the U.S. and Canada, as well as about 325,000 logos, signs and transit displays.

About seven years ago, it transitioned the company into a REIT. It’s certainly a unique business, and there are none of the risks that go along with many REITs trying to make money in a rising interest rate environment.

But LAMR is expensive, trading at a current price-to-earnings (P/E) ratio of 42. There’s just not enough growth in its model for that kind of valuation. Its current dividend is around 3%, but it’s hard to see how LAMR continues at this pace long term.

The stock gets a D rating in my Portfolio Grader.

On the date of publication, Louis Navellier has no positions in any stocks in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. 

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

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