5 Dividend Stocks Getting Slaughtered: 2 To Buy, 1 To Sell

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'm going to highlight five popular dividend stocks that have taken steep falls lately, and their prognosis moving forward. At the end, I'll offer you access to 11 company tickers that we believe represent excellent dividend opportunities.

MCG Capital (Nasdaq: MCGC)
MCG provides capital for middle-market companies. Think of it as a publicly traded private-equity company. MCG pays out a hefty 16.4% dividend, which is music to any dividend-lover's ears, and some Fool's think it's a steal at these prices. But I'm a bit more cautious; with small finance companies like this, just one or two deals gone wrong can ruin earnings. Though I'm not going to give it a red thumbs-down on my All-Star profile right now, I'm staying away from MCG.

Freeport-McMoRan (NYSE: FCX)
This copper, gold, and molybdenum miner has fallen on tough times lately, as its stock has plunged 15% since the beginning of February. The fall has to do primarily with fears of a recession in Europe and slowing growth in China. Both events could severely weaken demand for Freeport's products, which would send commodity prices spiraling. But I'm with Fool Jim Mueller on this one: These are short-term concerns for the long-term investor. With a 2.5% dividend yield that accounts for just 31% of earnings, Freeport will be getting a bullishCAPScallfrom me.

Quad-Graphics (NYSE: QUAD)
Though Quad has fallen just 6% over the past month, the long-term trend should add some perspective: The company is down over 70% over the past year. It all boils down to two simple factors. First, the company is in the printing business, and both the Internet and the quickly changing postal system are disrupting that business. Second, the company is spending money on paying out an 8% dividend yield and buying back shares while it has only $25 million in the bank and over $1.5 billion in debt. I'll be making a bearish call on QUAD.

Arch Coal (NYSE: ACI)
Coal miners have been having a tough time lately. A mild winter, sagging prices, and regulatory concerns have all weighed on the industry. Shares of Arch Coal are down 22% over the past month, largely because of their disappointing earnings release. The numbers certainly look good for Arch -- it has a dividend payout of 3.6% while only using 58% of earnings to make that payment, and has a miniscule PEG ratio of 0.46. But I tend to avoid the coal industry altogether, as I'm not very familiar with it. You may consider the stock a buy, but I'm staying away from Arch Coal.

Cellcom Israel (NYSE: CEL)
Finally we have Cellcom, Israel's largest cellular network. The company's stock is down over 15% on the month, and 42% over the past six months, largely due to slowing revenue growth, and increased customer turnover. To be honest, I understand investors' concerns, but I think Cellcom has been punished too much. Slowing revenue happens when telecoms become mature. The other thing that happens is that gobs of free cash flow coming into the company. With a safe 11.5% dividend yield, and a PEG ratio sitting at 0.60, Cellcom gets a bullish call from me.

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 11 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.

At the time thisarticle was published Fool contributorBrian Stoffeldoes not own shares of any company mentioned. You can follow him on Twitter, where he goes byTMFStoffel.The Motley Fool owns shares of Freeport-McMoRan Copper & Gold.Motley Fool newsletter serviceshave recommended buying shares of Cellcom Israel. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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