Though stable returns from a stock are “good to have” for all investors, it becomes a “must-have” factor for retirees. If you want to lead your post-retirement life peacefully, you must obviously choose stocks that are safe, not exposed to any risks and have only positive factors around them. Wall Street experts recommend you to invest only in stable stocks even if the returns are not phenomenal. While it is indeed good to invest in stocks with high dividend yields, when you see some absurdly high values, you must think wisely and stay away from them, rather than getting tempted by their high payouts. Let us see some of the stocks that you, as a retiree, should definitely stay away from, if you want risk-free returns.
Exchange rate problems and global challenges
Philip Morris International (PM, Financial), the tobacco giant, may be a great choice of long-term investment for a young investor. Not for retirees, definitely. The stock has undergone too many fluctuations and is exposed to many risks currently that would pose a huge burden on retirees. The last thing that retirees want is to see their life’s investments going for a toss in the market. So what are the factors that have made Philip Morris a highly volatile stock? The first and foremost factor that has been highly unfavorable for the company is exchange rate issues. The U.S. dollar has been gaining strength with every passing day and therefore revenues of Philip Morris from global businesses are getting impacted.
The second reason is that Philip Morris is not getting enough support from international markets for its products. Most of the countries like Philippines give preference to tobacco that are manufactured in their home turfs. Also, countries like the UK have been pressuring Philip Morris to change the packing and designing of their tobacco packs and replace them with a common design. International laws all over the globe have been made stricter when it comes to tobacco, giving Philip Morris a slight hiccup in this sector. Though Philip Morris’ dividend yield is 5.15% and payout ratio is 94.3% currently, retirees should stay away from this, as the stock is exposed to too many risks now. Let us see the stock movement of Philip Morris for the last year:
Not child’s play after all
It would come as a surprise for you to see your favourite toy maker, Mattel (MAT, Financial) figure in the list of high-yield stocks that you need to avoid. The name, behind some of the biggest brands like Hot Wheels, Fisher Price and Barbie, is indeed the biggest toy company in the world. So why has it fallen from grace now? For the past few years, the company’s hallmark brand, Barbie has reported drop in sales. The market share of Barbie was partly taken over by the “Frozen” brand of toys that were launched by Walt Disney (DIS, Financial). Sales of Mattel’s Barbie dolls dropped by 16%, Fisher Price dropped by 11%, and American Girl dolls dropped by 4% during 2014. The company is not in its brightest form now, which is why retirees should avoid this at all costs though the dividend yield of Mattel is quite high at 6.36% and the payout ratio is 100.7%. Investors who are looking for long-term returns need not panic because Mattel would definitely come back strongly into the toy market with newer toys. However, with the current volatility that the stock is experiencing, it is good for retirees to stay away from this. The stock movement of the company for the last few months is as follows:
Conclusion
Retirees should be very careful while picking stocks for investment. If they do not spend considerable time in making the right choices, they will have to bear the brunt of their mistakes. As the stock market is highly volatile, they will pay a heavy price if they make a mistake here. The following are just two of the stocks that they must avoid in spite of these stocks having great dividend yields. These stocks are facing heavy external pressure and are exposed to quite a few risks in the recent past; hence are not the apt choices for retirees.
