MENU

3 ASX companies facing potential dividend cuts

Stock filters provided by online trading platforms can be a useful tool when used correctly, but it is important that investors are not misled by out-of-date or inaccurate data.

One of the biggest areas that I think investors can be fooled by is quoted dividend yields.

For example, it is not uncommon for companies to cut their dividends, yet this may not be reflected in the data for weeks or months later.

Another way investors can be fooled is by relying on dividend forecasts that are too optimistic. In this regard, investors should look at whether the company’s earnings can support the dividend payout and, perhaps more importantly, whether the dividend can be funded from operating cash flows.

With those points in mind, here are three shares that I believe have very shaky-looking dividend yields right now:

Telstra Corporation Ltd (ASX: TLS)

It is always concerning when a company pays out a dividend that is greater than its current earnings. This is exactly what has happened with Telstra after it just declared a 15.5 cent per share interim dividend but only generated earnings per share of 14.8 cents. This is clearly an unsustainable situation and one that could become a much bigger problem unless the company finds a way to quickly fill the looming $2 billion to $3 billion earnings hole caused by the NBN. While a 6.7% dividend yield looks good now, investors could face a far bigger loss of capital if earnings continue to fall.

Ainsworth Game Technology Limited (ASX: AGI)

According to CommSec, Ainsworth Game Technology is trading on a dividend yield of 5.6%. This appears quite attractive but upon closer inspection investors will discover the poker machine maker actually suspended its interim dividend as a result of a big fall in first-half profits and operating cash flow. The company has promised a stronger second-half performance on the back of improving conditions in North America, but investors are still not guaranteed the dividend will be reinstated.

Platinum Asset Management Limited (ASX: PTM)

Platinum is one of the highest yielding fund managers on the ASX, but this is more a result of a declining share price, rather than any increase in dividends. In reality, investors were lucky not to see its interim dividend cut last month after the company reported a 20% decline in first-half profits. Unfortunately, the outlook for Platinum is not overly positive with its latest funds under management update revealing another big outflow of funds during February. As a result, I wouldn’t bank on its current 6% dividend yield being maintained and believe there could be a dividend cut in the not-too-distant future.

Are you looking for rock-solid dividend shares?

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks means stability, profitability and regular dividends, often full franked..

But knowing which blue chips to buy, and when, can often be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

The contrast to these "new breed" blue chips couldn't be greater... especially the very real prospect of significant share price gains, something that's looking less likely from the usual blue chip suspects.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Christopher Georges owns shares of Ainsworth Game Technology Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

HOT OFF THE PRESSES: My #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.