Beware of These Dividends

The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics across the investing world.

Barron's ran a great article warning about "The Danger in Dividend Stocks." John and David don't want to be alarmists, especially since they own a few dividend stocks. Investors should be choosing their dividend stocks wisely, however. Let's take Verizon and AT&T, for example. Today, they yield 4.6% and 4.8%, respectively. Adjusting for dividends, their stock prices are up 74% and 66% over the past three years, for companies with low single-digit sales growth.The Barron's article points to the utility Southern Co. and its 4.3% yield. Even with no growth, investors are paying higher and higher multiples. These are examples of dividends to be careful about. Two dividend payers to consider are Waste Management and McDonald's. Both are solid companies with strong moats and moderate growth ahead of them. They yield 3.1% and 4.1%, respectively, and would be wise choices in today's environment.

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David Meier has no positions in the stocks mentioned above. John Reeves owns shares of Verizon Communications. The Motley Fool owns shares of McDonald's and Waste Management. Motley Fool newsletter services recommend McDonald's, Southern Company, and Waste Management. 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.

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