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AT&T Inc. (T), Tootsie Roll Industries (TR): Be Wary of These Stocks With Weak Dividend Growth

AT&T Inc. (NYSE:T)When it comes to how I construct my portfolio, I seek companies that increase their dividends over time. As a dividend growth investor, I want to avoid companies that are not growing dividends at a rate above inflation. I also want to avoid those that are slowing down dividend growth.

Let’s look at some companies that I would be cautious investing in long term. We will inspect valuation metrics, as well as the direction the dividend is heading in. Finally, we will look at why the dividend could remain in trouble moving forward. Remember – it is OK to have a stagnant dividend if you are only concerned with income. I simply require dividend growth, as I look to invest for the long term.

Is it time to hang up on this stock?

AT&T Inc. (NYSE:T)

AT&T Inc. (NYSE:T) is an American telecommunications company. It provides land line and mobile phone services, internet, and television services.

source: Yahoo Finance

P/E: 27.70

P/CF: 7.4

Dividend Yield on Current Prices: 5.00%

5 Year DGR: 4.4%

3 Year DGR: 2.4%

1 Year DGR: 2.3%

    Dividend headwinds

    AT&T Inc. (NYSE:T) has some challenges to overcome in the short to medium term. This can be summarized in a couple ways. The first aspect of this challenge is AT&T Inc. (NYSE:T)’s need to adjust to a shift in consumer technology demand. Consumers are slowly shifting away from land lines and towards mobile phone services. This has caused a steady decline in AT&T Inc. (NYSE:T)’s land line revenues.

    Secondly, AT&T Inc. (NYSE:T) is involved in a capital intensive industry. It requires massive capital investments in order to build a network of telecom infrastructure. Verizon recently warned that the growth of its wireless segment has caused strain on its data network. An increase in estimated capital requirements to fortify its network were announced. This effect will surely carry over to AT&T before long.

    This will potentially take away from AT&T’s ability to grow its dividend. As you can see, the dividend growth rate has been below the historical inflation rate over the last 3 years.

    This stock isn’t very sweet

    Tootsie Roll Industries (NYSE:TR)

    Tootsie Roll Industries (NYSE:TR) is an American candy maker. Known for its world famous Tootsie Roll Industries (NYSE:TR), it sells its products across the world.

    source: Yahoo Finance

    P/E: 39.60

    P/CF: 17.9

    Dividend Yield on Current Prices: 0.90%

    5 Year DGR: 2.8%

    3 Year DGR: 2.7%

    1 Year DGR: 2.3%

      Dividend headwinds

      Tootsie Roll Industries (NYSE:TR) Industries is what you would call “stagnant.” It has been a very conservatively run company. This low growth (2% sales growth) has left it in a position where it may be tough to increase its dividend. It pays out almost all of its earnings (91%), and the cumulative salary of upper management represents 1/3 of its net income!

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