Why PetSmart, Inc., Frontier Communications Corporation, and Windstream Holdings, Inc. Are Today's 3 Worst Stocks

Three companies paying dividends end as the worst performers in the stock market today.

May 21, 2014 at 7:42PM

Stocks finished broadly higher on Wednesday as fear that the Federal Reserve would begin raising interest rates anytime soon waned. All three major U.S. stock indexes ended with gains, but apparently PetSmart (NASDAQ:PETM), Frontier Communications (NASDAQ:FTR), and Windstream (NASDAQ:WIN) didn't get the memo, finishing as some of the worst performers in the S&P 500 Index (SNPINDEX:^GSPC). The S&P, for its part, added 15 points, or 0.8%, to end at 1,888.

PetSmart shed 8.3%, as the pet food retailer took a beating after first-quarter sales numbers failed to live up to expectations. Investors expected more robust same-store sales growth than the meager 0.6% seen last quarter, and the fact that same-store sales growth decelerated so quickly from the 3.5% seen in the same quarter a year ago is a cause for concern. On top of that, PetSmart is dragging its feet to get pet treats made in China off its shelves, even though the treats have been responsible for thousands of customer complaints over the years.

Although all 10 sectors advanced in the stock market today, the telecom sector barely made it off the ground, adding 0.1%. Frontier Communications would have gladly taken a mere 0.1% gain -- instead it slumped 4.3% Wednesday, even with a 6.8% dividend yield to lure investors to the stock. Although there was little news surrounding the stock today, a Barron's article on Monday, citing the stock's 30% year-to-date gains and "waning momentum" didn't help Frontier's popularity on Wall Street. Whatever Wall Street thinks about Frontier today, it's hard to argue that its $2 billion purchase of AT&T's Connecticut business at the end of last year was ill-advised.

Windstream Logo

Source: Windstream

Fellow telecom services provider Windstream joins Frontier at the bottom of the S&P Wednesday, having lost 1.5%. If you want to talk juicy dividends, few stocks boast the dividend juice of Windstream, which rewards investors to the tune of 10.7% annually. But my colleague Chad Henage poses the real $64,000 question investors should be asking themselves, along with two others: Is that dividend sustainable? Given that Windstream is losing customers, has large amounts of debt, and plans to increase capital expenditures moving forward, the answer isn't certain by any means.

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John Divine has no position in any stocks mentioned. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.

The Motley Fool recommends PetSmart. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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