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I’m on a unending quest to uncover one of the best dividend shares on the FTSE indexes. That is a part of a plan to construct a gentle stream of passive revenue earlier than I retire.
Nevertheless, throughout my search, I often come throughout shares that I wouldn’t go close to. Throwing cash into shares solely to see the dividends minimize and the share value collapse is an investor’s nightmare.
With that in thoughts, listed below are two dividend-paying shares that I might give a large berth to for now.
First up is shoe producer and marketer Dr Martens (LSE: DOCS). I don’t have something towards the favored leather-based boots however issues simply aren’t going properly these days. It’s had 5 revenue warnings prior to now three years, the latest on 16 April. By March subsequent yr, it fears revenue earlier than tax may very well be down by as a lot as 66%.
In equity, 2023 had extra revenue warnings for UK firms than in the course of the 2008 monetary disaster, so it’s not alone. As a specialist premium model, it sells the kind of merchandise that many customers merely can’t afford throughout financial hardship. At a a lot increased value level, main UK luxurious trend home Burberry is dealing with an identical wrestle.
Its saving grace is that it’s a robust model with a historical past of excellent administration. When (or if) inflation falls and the economic system recovers, I’d count on to see it discover its ft once more. However till then, the engaging 6.8% dividend yield could also be minimize to save lots of on prices. It’s solely been paying dividends for just a few years and already forecasts predict the yield will fall to three.3% within the coming years.
Hopefully, new CEO Ije Nwokorie can flip issues round when he takes workplace later this yr. However with earnings forecast to say no at a median price of 35% per yr going ahead, I wouldn’t purchase the shares in the mean time.
A rebranding disaster?
The asset supervisor abrdn (LSE: ABDN) is dealing with a completely completely different set of issues. Since rebranding from ‘Normal Life Aberdeen’ to ‘abrdn’ in 2021, it’s confronted a barrage of dangerous press and a 53% drop in share value.
Personally, I believe the identify is fashionable and enjoyable – however it might be a bit forward of its time for a monetary agency. Though I doubt the identify alone is accountable for the corporate’s struggles. In any case, it has a robust steadiness sheet with minimal debt, excessive fairness, and belongings that far outweigh its liabilities. So what’s the deal?
My important concern is that dividend funds have been unstable and steadily lowering. They fell from 24p per share in 2015 to 14p this yr, whereas the yield elevated to nearly 10%. This reveals simply how a lot the share value has collapsed prior to now decade. If issues don’t get higher quickly, I can solely think about dividends will likely be minimize additional.
That stated, abrdn is seeing one thing of a revival. After posting a £558m loss in 2022, it’s managed to come back again into revenue this yr. And with earnings forecast to develop at a price of 56% going ahead, it might nonetheless have a brilliant future.
Till then, nevertheless, I gained’t be including it to my dividend portfolio.
