Top 10 Value Traps

Alexander Wissel, Editor in Chief, Investment U

With the credit crisis ransacking good companies and leaving less stable ones in shambles, some of the metrics used to find good “values” are setting some value traps for investors. Here are the Top 10 Value Traps that have unreasonably high dividends:

If a dividend yield looks too good to be true, it generally is. If the stock price has plummeted, ratcheting up the yield, look for the company to cut its dividend to save money. Even if the firm can support a higher dividend yield, many will choose to reduce their dividend simply by being in an environment where everyone else is. The result: the share price drops even further after investors who expected high yield jump ship. Investors who don’t move fast enough find themselves “trapped” by this falling stock price – hence the term “value trap.”

• Nordic American Tanker – Income and More
• Nucor (NYSE: NUE) & The Golden Dividend Ratio
• Dividend-Paying Stocks: 5 Pharmaceutical “Cash Machines”

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One Response to “Top 10 Value Traps”

1. Dave So Says:
   March 3rd, 2009 at 4:21 pm

   Fred Goodwin ex senior director of The Royal Bank of Scotland should lose his pension. He hasn’t done well for his company and should suffer the consequences. Should the senior director for any company not be held responsible? Letting him get away with such a big pension is ludicrous.

   Reply

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