Why Exelon Corporation, NextEra Energy, Inc., and Tyson Foods Inc. Are Today’s 3 Worst Stocks

What's wrong with dividends? Nothing, actually -- they're godsends for the long-term investor. However, dividend sustainability becomes a concern as interest rates rise.

Jul 3, 2014 at 7:00PM

The stock market closed three hours early today ahead of the Fourth of July holiday tomorrow. That didn't stop investors from sending both the Dow and the S&P 500 Index (SNPINDEX:^GSPC) to all-time highs in a hurry on the heels of a stunningly resurgent jobs market. The U.S. Labor Department's monthly nonfarm payrolls showed that the economy created a seasonally adjusted 288,000 jobs in June, a figure so comically far above the 211,000 consensus expectation, it made the economists responsible for the lowball forecast look downright silly. Looking even sillier were shares of Exelon Corporation (NYSE:EXC), NextEra Energy, (NYSE:NEE), and Tyson Foods (NYSE:TSN), which each somehow managed to fare miserably as stock markets hit all-time highs, and Americans literally prepare to jubilantly launch fireworks, grill out, and enjoy life.

Unfortunately for today's three laggards, they hail from a sector that actually tends to suffer when investors are slapping each other on their backs, and stock markets are roaring to record highs. That sad-sounding sector, of course, is the utilities sector. Do you know what percentage of S&P 500 stocks advanced today? Well, 80%. Eighty percent. Care to guess how many of the S&P's 10 worst performers were utilities stocks today? All 10. Every last one of the worst performers was a utility stock. Exelon shares ended as one of Thursday's more pronounced decliners, dropping 1.8%. So why was Wall Street so down on Exelon today? Sure, it's dealing with some fallout from Midwest storms earlier this week, and Hurricane Arthur won't do it any favors; but it's one of the largest utilities in the country, rewarding investors with a 3.4% annual dividend yield to boot!

But if chunky dividends and large market caps were the only things investors wanted, shares of $42 billion electric utility company NextEra Energy wouldn't have lost 1.5% on Thursday. The concern with NextEra Energy, Exelon, and utilities stocks, in general, in a clearly improving economy, revolves around the fear of higher interest rates. The momentous job growth in June put the unemployment rate at 6.1% -- its lowest level in nearly six years -- and capped off a five-month job-creating binge that was last matched in 2006. You can bet this unexpected strength has the Federal Reserve thinking about when it should raise interest rates again -- an act that would impair the ability of utilities like NextEra and Exelon to keep paying fat dividends.

Tysonfoods

It takes a stronger person than I to say no to some food like this. Source: Tyson Foods

While it's true that the day's worst stocks were all utilities, Tyson Foods deserves special mention for underperforming with the worst of 'em, as the mere meat-packing giant that it is. Tyson Foods, which produces all sorts of poultry, beef, and pork products, shed 1.2% on Thursday. You've likely seen the brand plastered all over your local grocery store for years, but Tyson has grander ambitions: It wants to take a bite out of Jimmy Dean. As of yesterday, the company did just that, snapping up Hillshire Brands -- which also makes Ball Park hot dogs -- for $7.7 billion. While a plan to acquire an iconic hot dog brand in the days before the Fourth of July isn't beyond the dexterous financiers of Wall Street, Tyson's Hillshire deal won't officially close until late September.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

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 Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers