There is no doubt that 2018 started very well after the tax reform was signed into law. It was a big boost to investors as this translated into more profits, which of course later trickles down in form of buybacks, dividends and earnings-driven gains.
Well, this is great news to anyone who is holding blue-chip dividend stocks. However, it doesn’t necessarily mean that every last eminent income play is worth selling.
Today I want to take you through two blue-chip dividend stocks that you need to sell this year.
Procter & Gamble (NYSE: PG)
Dividend Yield is 3%
Procter & Gamble is apparently an impregnable consumer staples giant. It is amazing how it has managed to weather several American economic cataclysms since it started in 1837. The company also boosts of a steady annual payout growth for a consecutive six decades now
Its backbone has been a striking array of multi-million dollar brands which include Charmin toilet paper, Bounty paper towels, Dawn dishwashing soaps, and Gillette razors
But, to be honest, the company’s shares have been a recurrent underperformer as its sales have gradually eroded by approximately 23% since 2014. Well, it’s very true that the managed to cushion its bottom line but has faced numerous challenges among them being restructuring moves and massive job cuts. Analysts are expecting a rather low-single-digit top-line growth this year, which makes it almost impossible to validate a price-to-sales of more than 4 and forward price-to-earnings ratio of 21.
And whilst Procter & Gamble deserves acclamation for several years of steady dividend growth, analysts say the growth is happening at a snail pace. In 2017, it managed to raise its payout by only 3% –compared to 2016’s 1% uptick.
So, basically, Procter & Gamble will certainly help protect your portfolio by of course not losing your money, but you can be sure it won’t earn you a noteworthy amount.
Starbucks Corp (NASDAQ: SBUX)
Dividend Yield is 2.1%
It’s only fair we give credit where it’s due. Starbucks – has been a dividend growth giant, approximately tripling its quarterly dividend to 30 cents from a payout of 10.5 cents over the past few years.
If only the stock were as nimble.
Over a couple of two year, Starbucks shares have basically flat lined since its growth has significantly slowed down – though not to a standstill. For instance, in 2017, the top line grew just 5%.
More particularly, Starbucks significantly, slashed its 2018 earnings outlook last year November 2017, and it is expecting a 12% yearly earnings growth in the long-term, compared to the initial expectation of between 15% and 20%.
But still, Starbucks’ unostentatious growth expectations regardless of its supercilious international plans to put up a situation just like the past years where simply “good enough” expansion is not really … good enough. The modest profit plans which could also see the hiking of modest dividends going forward, is the only reason that makes Starbuck worth watching.