Should you buy these 3 falling stocks for their dividend?

Do any of these falling stocks represent a good deal at today's price? …

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Although the market is up almost 1% today, not everyone is necessarily feeling the love.

Shareholders of Fairfax Media Limited (ASX: FXJ), Sky Network Television Ltd (ASX: SKT), and Coca-Cola Amatil Ltd (ASX: CCL) have all experienced price falls today with shares of each of these companies down 1%, 4.70%, and 3.0% respectively.


Investors have been wholly unimpressed with its announcement on 3 July 2017 that confirmed it's no longer in discussions with two private equity firms bidding for all or some of its assets. Additionally, it's clear there's a bit of angst out there in the market with Fairfax's decision to separate its online real estate business Domain from itself.

To me at least, Domain is probably one of its best assets and, after the separation, it can be asked 'what's left'? Clearly, not enough to attract motivated buyers and so it remains to be seen how Fairfax's strategy continues to play out in the years ahead.

The partially franked yield currently sits at 4.1%.

Sky Network Television

There have been no material announcements from Sky Network Television today, however, funds manager Perpetual Limited (ASX:PPT) recently has disclosed its selling down its stake in the Kiwi pay-TV business by almost 390 million shares, or 1% of the company.

Despite lacklustre revenue growth and falling net profits, it still is able to earn quite good EBIT margins currently north of 20%. However, these too are in a downward trend, and I do wonder about the company's competitive moat in the years ahead with the likes of Netflix and other cheap (free) streaming video options available almost everywhere one can access an internet connection.

If televised sport can stop the downward trajectory in its returns to shareholders, this could be a screaming buy with a 10% (unfranked) yield at current prices, even if the dividend is cut. However, any cuts to the dividend could go further than anticipated if the company's key metrics continue to worsen.

Coca-Cola Amatil

Shares in this Australian bottler and distributor of ready-to-consume beverages took another hit today as media reports indicate that Woolworths Limited (ASX: WOW) has decided to not stock Coca-Cola Amatil's bottles of Mount Franklin water.

On top of the news only last month that Woolies had declined to stock Coca-Cola's 'No Sugar Coke' product, is it any wonder that its share price is down?

With Australian revenues trending down since 2012, it will be interesting to see if CEO Alison Watkins can stabilise the ship and prevent further business losses from happening.

The current partially-franked yield is 5.5% which looks to be reasonable value if management can stabilise its Gross Margin and find some reasonable growth in revenue.

There are clear business risks here though and it pays to watch the company's economic performance closely from here on.

Foolish takeaway

The higher the [dividend] return, the higher the risks.

It doesn't mean purchases of shares of any of the above companies is necessarily a silly thing to do, but it does pay to be careful.

Personally, I'd keep these share ideas on a watchlist for now and continue to monitor their performance during the next reporting season and go from there.

In the meantime, we have a special report on what we think will be 2018's top dividend ideas which you obtain simply by clicking on the link below.

Motley Fool contributor Edward Vesely has no position in any stocks mentioned. 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.

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