Dividend stocks are great for income investors, because they offer a combination of current income and future growth potential. But in some cases, companies get ahead of themselves in paying dividends that aren't sustainable in the long run. With that worry in mind, below we'll look at Staples (NASDAQ:SPLS), CenturyLink (NYSE:LUMN), and Mattel (NASDAQ:MAT) to see about their prospects for continued dividend success.



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Data source: Yahoo! Finance. Amounts are per share.

Staples seeks to rebound

Times have been tough for Staples lately, as its attempt to merge with a major peer in the office products retail space got rebuffed by regulators. In response, the company has been exploring other strategic options, including a potential sale of the company. Yet some investors are skeptical that buyers would be interested in Staples, especially given the decline of its brick-and-mortar retail business and new competition from e-commerce giants attacking the office supply space.

But despite earnings-related challenges lately, investors are still comfortable with the idea that Staples will be able to generate enough profit to sustain dividends going forward. The current consensus forecast among investors for Staples earnings during the 2018 fiscal year are at $0.88 per share, which is almost double what the office supply retailer is paying in dividends currently. Staples faces many challenges, but if it can execute on its turnaround strategies, then it seems to have the earning power over the long run to hold onto its dividend.

Dividend notebook with cash, calculator, and glasses.

Image source: Getty Images.

CenturyLink deals with deteriorating earnings

CenturyLink is a player in the telecommunications space, but it has had difficulty recently in sustaining its financial strength. In its most recent quarter, CenturyLink reported revenue that was down more than 4%, and operating income was down an even sharper 8% in a tough environment. In response, the company is looking to make a major acquisition, but that in itself will present some challenges for the telecom company. Meanwhile, one of its most prominent peers recently had to cut its own dividend, making some believe that CenturyLink will be next.

However, there's hope for CenturyLink. Interest from an activist investor suggests that there could be ways for CenturyLink to bolster its growth in a way that will help it cover its dividend payments more easily. More importantly, with national scope and a key enterprise business that has growth potential, the telecom is in a better position than some of its competitors to keep up with the rapid pace of change in the industry and find paths to future growth.

Mattel must up its game

Toymaker Mattel has seen many of the same challenges as the other companies on this list, and its recent results have been disappointing. The toymaker suffered a 15% drop in revenue in its most recent quarter, and that sent its net loss soaring by more than half from year-ago levels. The retail industry has struggled, and fewer orders from retailers mean that Mattel has been stuck with unacceptable levels of inventory. Although Mattel has made progress on that front, it will take time for efforts to make its toys more compatible with modern ideas to pay off.

Mattel hopes to bounce back with several initiatives, including plans to get more tech-savvy, expand more aggressively into emerging markets, and maximize internal efficiency. For now, investors seem optimistic, and they believe that by 2018, the company might earn enough to match its current annual dividend payments. However, if Mattel hits further snags, it could necessitate a dividend cut at some point.

High-yielding dividend stocks have a lot going for them, but there's often a good reason why their yields are so high. Mattel, CenturyLink, and Staples all have a chance of finding renewed success and sustaining their dividends, but if things don't start going better for the companies soon, their dividends could be in danger over the long run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.