Investors flock to high-yielding stocks for income, but they also sometimes assume that chunky dividends make an investment less risky or volatile. Things don't always play out that way. There were dozens of stocks with hearty yields taking big hits last week.
Seagate Technology (STX), AT&T (T 1.88%), and Six Flags (SIX -0.50%) all suffered double-digit percentage declines. They started off the week with fat dividends, and now those yields are now even fatter. Let's go over why these stocks took a hit, and where their high payouts stand now.
| Company | 10/19/18 Yield | 10/26/18 Yield | Stock Decline |
|---|---|---|---|
| Seagate | 5.8% | 6.5% | (11%) |
| AT&T | 6.1% | 6.9% | (12%) |
| Six Flags | 4.7% | 5.8% | (18%) |
Data Source: Yahoo! Finance.
Image source: Six Flags Entertainment.
Seagate Technology
The hard drive and storage solutions giant doesn't report its quarterly results until Friday morning of this week, but investors heard enough when peer Western Digital (WDC -0.53%) stunk up the stage with its financial update last week. Western Digital fell short of analyst expectations, and it warned that cascading flash memory prices will drive to reduce its output in 2019.
Seagate's 11% tumble last week is half of Western Digital's 22% plunge, but it's easy to see why concerns of oversupply will weigh on Seagate when it reports this week. The move pushes Seagate's yield up to 6.5%, and at least investors are already bracing for the worst heading into Friday morning.
AT&T
The telco pioneer is diversifying into various entertainment and wireless businesses, but it wasn't enough to spare Ma Bell from another unpleasant quarter. The stock would go on to hit a six-year low.
Revenue rose 15% for the quarter, but that was largely the handiwork of the $110 billion deal for Time Warner that closed just before the period began. On a pro forma basis AT&T posted essentially flat top-line growth, as strength at WarnerMedia and its wireless divisions were held back by weakness everywhere else. AT&T is clinging to full-year guidance calling for $3.50 a share in adjusted earnings and $21 billion in free cash flow. This makes AT&T's chunky dividend relatively secure after 34 years of hikes, but there are a lot of moving parts at the telco giant these days.
Six Flags
Roller coasters have their ups and downs, and last week it was gravity doing the dirty work at Six Flags. The stock plummeted 18% after falling woefully short of analyst top- and bottom-line targets. Revenue rose 7%, but that was mostly the result of new parks it acquired. Net income rose a mere 2%, making this the first time in more than a year that the regional amusement park operator misses analyst profit forecasts.
Analysts hosed down their price targets on the stock following the report, citing inconsistent attendance trends, concerns about international expansion plans, and a lack of transparency in explaining the miss. Six Flags had led the way for its industry with robust growth through the first half of the year, and it's unfortunate to see it pull up lame in the most seasonally significant summertime reporting period.
