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5 Dividend Stocks Getting Slaughtered -- Including 2 Potential Buys

Over the past several years, no type of stock has been more popular than the dividend-paying variety. Investors have been wooed by the guarantee of payouts that help secure their investments.

At the same time, however, shareholders need to realize that steep declines in the price of their shares could easily cancel out any gains they experience through dividends. Below I will highlight five popular dividend stocks that have taken steep falls lately, as well as their prognosis moving forward. At the end, I'll offer you access to nine company tickers that we believe represent excellent dividend opportunities.

EXCO Resources (NYSE: XCO  )
It's no secret that natural-gas companies are reeling from plummeting prices for their commodity. EXCO -- which has its hand in both oil and natural gas, offers a 2.7% dividend yield, and is down 70% from its 52-week high -- is no exception. The company's stock is highly levered to the ups and downs of natural gas's price.

Though the cheap natural gas could have a boomerang effect -- offering incentive for other industries to develop technologies that use the stuff, thereby increasing demand to meet supply -- it may be too early to jump in right now. For now, I'd stay on the sidelines with this one.

Nokia (NYSE: NOK  )
This cellphone maker from Finland has certainly seen better days. Not only are its core cheap feature phones on a decline, but a glitch in the much-hyped Lumia 900 is giving the company headaches. Nokia currently offers a 4.3% dividend, but that may have something to do with the fact that it's down more than 50% since a year ago.

The Lumia was supposed to be the first big step in a turnaround for the company, and problems with high-speed data connection drops are just embarrassing. With Apple and Google currently dominating the smartphone market -- with a combined 80% share -- mistakes like these will make it that much harder for Nokia to compete. They could still turn things around, but they aren't getting my vote of support right now.

Banco Santander (NYSE: STD  )
Get prepared for a shocker: Banks in Europe aren't doing too well -- at least, on the stock market. I know, big surprise, right? With shares of this Spanish bank off almost 50% from a year ago, Santander's dividend yield now stands above 13%.

I'm not going to pretend that all is well in Europe, and that there aren't still painful days on the horizon. However, I think that if you're willing to invest for the long run, today's prices represent an excellent entrance point for the company. If European leaders have the political will to quell their debt and austerity issues, Santander could be a big winner. I'll be making a bullish CAPScall on my All-Star profile for the bank.

Gafisa (NYSE: GFA  )
We all know it's a bad time to be a homebuilder in America, but what about Brazil? That's where Gafsia -- which develops residential neighborhoods -- does its business. Currently offering a 5.3% dividend, the company is more than 60% off its 52-week high.

Worries about interest rates in Brazil, as well as concern that economic expectations may be a touch too high in the country, have contributed to the downfall. Although the company doesn't have a stellar record of meeting analyst expectations, I'm willing to get behind this one. With a forward P/E of 7.6, a PEG ratio of just 0.3, and the number of delivered housing units in the first quarter of 2012 double what it was in 2011, I think this company deserves more respect from Wall Street, and I'm not alone.

OPNET Technologies (Nasdaq: OPNT  )
Finally, we have OPNET, a provider of management software. The company is currently yielding a 2.8% dividend yield and is roughly 40% below its 52-week high. When the company announced preliminary earnings that were short of estimates, it was roundly punished by traders.

I'll be keeping my hands off this stock for now. Management software isn't my area of expertise, and the company has had a string of disappointing announcements. That, combined with the fact that the company paid out more in dividends than it brought in through free cash flow last year, just doesn't make me comfortable.

Some great dividend ideas
Clearly there's a lot to think about before diving in and buying dividend stocks that have taken a tumble lately. If investing in dividends is what keeps your portfolio humming, I suggest taking a look at our latest special free report on nine rock-solid dividends. Our analysts have handpicked their favorite dividend stocks to help bring your retirement portfolio to prosperity. Get your copy today, absolutely free.

Fool contributor Brian Stoffel owns shares of Google and Apple. You can follow him on Twitter, where he goes by TMFStoffel.

The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Nokia, and Google, and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (8) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 13, 2012, at 6:15 PM, rsinj wrote:

    XCO dividend should not be a consideration for purchasing the stock. It will likely be reduced or eliminated entirely.

  • Report this Comment On April 13, 2012, at 6:22 PM, TMFCheesehead wrote:


    Entirely possible! Didn't want to jump the gun w/o any solid info to back it up though.

    Brian Stoffel

  • Report this Comment On April 13, 2012, at 7:38 PM, rsinj wrote:

    Brian - check the press release for the dividend that was just paid. They added an ominous statement in there opening the door to reduction/elimination.

  • Report this Comment On April 14, 2012, at 1:24 PM, Teacherman1 wrote:

    STD is a reasonably strong bank which happens to be "overidentified" with Spain and the problems they are having.

    While they have a significant portion of their business in Spain, they also have a lot of it in other countries.

    The problem with Spain right now is that the fairly recently elected conservative federal govt is at odds with some of the still strong socialist regional govts.

    The federal govt. is attempting to implement austerity measures, but is running into strong regional govts. that are fighting it.

    The govt. in Spain is structured a little differently than in most other countries, and this apparent conflict is causing "skittishness" among investors as they are not sure that the federal govt. will be able to lower costs as much as they need to.

    The hope, and expectation now, is that the ECB will move from primarily providing support to the European banks, and move into providing soverign support by buying bonds issued by Spain and others.

    Spain has some of the same problems that hurt Greece, in that they have for some time had a socialistic govt., with strong unions, and high chronic unemployment.

    The main difference is that Spain "actually produces things".

    It will be interesting to see how this all plays out, but I still feel confident that STD will remain very viable, and over time pay off well for the patient investor who takes advantage of these current low prices.

    JMO and worth exactly what I am charging for it.

  • Report this Comment On April 14, 2012, at 4:31 PM, rsinj wrote:

    STD has good exposure to East Coast US via Sovereign Bank which they bought a few years back.

  • Report this Comment On April 15, 2012, at 8:40 PM, TMFBreakerRob wrote:

    There's an excellent STD thread on the Falling Knives board (no newsletter subscription required) for those who would like some in depth commentary.... and who might also have something to say as well. :)

  • Report this Comment On April 16, 2012, at 4:17 PM, Sotograndeman wrote:

    STD, the strongest bank in Spain, gets only 25% of revenues from the Iberian peninsula. The rest is overwhelmingly from S America but very little from the US. But Spanish banks are still questionable and in need of recapitalization. Their exposure to the collapsing real estate sector in Spain is a huge threat to their very existence. Property has even yet not been marked to market. The corrections will be huge.

    The main rationale for holding XCO is not the dividend which may well be eliminated.

  • Report this Comment On May 26, 2012, at 12:44 AM, BigTasteT wrote:

    I like GFA, all time low was my indicator to get in. The $5 calls longest out in the chain are really cheap too. i bought the stock, but I think macro forces could force it a little lower. That dividend gives me a lot of confidence, a lot of "institutional investors" dumped it and I see a lot of value in GFA.

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