Vector Group Still Can't Afford Its Dividend

There is nothing good about an unsustainable dividend. A high yield may look good on paper, but it can result in negative total returns when a company doesn't have the cash flow to cover its large payout. That's why diversified tobacco company Vector Group's (NYSE: VGR) decision to slash its $0.40 quarterly dividend is good news for investors. That said, it's also too little too late. 

Decades of unsustainable payouts have left Vector Group with more than $1 billion in long-term debt -- much of it issued at deep junk levels. Given that interest expenses alone are swallowing about half of operating income, investors should avoid this stock until it gets its balance sheet under control.

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Source Fool.com