Investing Topics: Endangered Dividends

We sold Aggressive Income Portfolio member Windstream Holdings (NSDQ: WIN) for a roughly 52 percent profit since October 2013, and look at four other companies facing challenges.

The outlook is much brighter for this utility's foray into solar, and for one of our closed-end funds. Unfortunately, other companies still face serious challenges.

Four of the holdings in our Endangered Dividends List still have potential upside, but a questionable acquisition by one propane distributor rates a sell call.

Half a dozen European utilities and telecoms cut dividends in March. The happy count from April: Zero. Several companies this month even graduated from the Endangered Dividends List.

Soft economic growth and dysfunctional regulation have brought payout cuts for five European power, telecom and water providers. And all but one signal further reductions in the next 12 to 18 months.

TransAlta Corp (TSX: TA, NYSE: TAC) has cut its quarterly dividend by 37.9 percent to 18 cents Canadian, starting with the April 1 payment. The new level is low enough to maintain at least the next couple years. As a result, I’m removing the company from the Endangered Dividends List.

Not every buy and hold investor has the savvy and steady temperament to be as successful as Warren Buffett. Similarly, not every short seller is insightful and nimble enough to match Jim Chanos’ storied success.

With large financial institutions and exchange-traded funds (ETFs) dominating daily trading, markets are as volatile as ever.

Fortunately, the key to success in utilities and essential services is the same as it’s been for more than a century: Spotting where investment will earn a fair return, and following the money to a rising stream of dividends.

This week, FirstEnergy Corp (NYSE: FE) announced the first electric utility dividend cut for 2014. Fortunately, it’s likely to be the last as well.