U.S. Dividend Stocks Aren’t Safe — Buy in Europe Instead
12/09/11 – 12:39 PM EST
BOSTON (TheStreet) — Investors have been told to seek the safety of boring U.S. stocks with predictable businesses and attractive dividends to protect their money from Europe’s debt meltdown and slowing U.S. economic growth.
That strategy isn’t bulletproof. DuPont(DD), the U.S. chemical maker that’s a member of the Dow Jones Industrial Average, saw its shares plummet as much as 7% today after the company cut its full-year profit forecast.
DuPont’s big 3.5% dividend yield is doing little to cushion the blow. Investors are now wondering whether there’s any U.S. equity class that can help shelter them from a downturn. DuPont’s CEO is blaming slower growth on “global economic uncertainty,” the same thing investors were looking to avoid.
DuPont wasn’t alone in slashing its forecast. Chipmakers Texas Instruments(TXN) and Altera(ALTR) as well as Japanese carmaker Toyota, though not all big dividend payers, also said profits would be lower than originally thought.
For example, DuPont has a 3.5% dividend yield, one-year revenue growth of about 20% and a forward price-to-earnings ratio of 10. To a U.S. investor, that may sound like an attractive opportunity. But in Europe, German chemical company BASF has a lower P/E ratio, one-year revenue growth of 26%, and a dividend yield above 4%.