9/30/2014

Walgreen Company Matches Q4 EPS Estimates; Stock Rises (WAG)

Walgreen Company (WAG) reported its fourth quarter results before the opening bell on Tuesday morning, posting a 6.4% increase in revenues and a 1.4% increase in adjusted EPS compared to last year’s Q4.

WAG’s Earnings in Brief

Walgreen reported a fourth quarter loss of 25 cents cents per share, compared to last year’s Q4 earnings of 69 cents per share. On an adjusted basis, earnings per share came in at 74 cents. Sales for the quarter came in at $19.057 billion, up from last year’s Q4 sales of $17.941 billion. The company’s total sales for comparable stores rose 5.4%. Walgreen’s results met analysts’ expectations of 74 cents EPS, and revenue came in just above the expectation of $19.03 billion.

CEO Commentary

Walgreens President and CEO Greg Wasson released the following comments: “Our fourth quarter performance was in line with our expectation, recognizing we have much more to do. We closed the fiscal year by exercising the option for the second step of our strategic transaction with Alliance Boots, completing the transition of our pharmaceutical distribution to AmerisourceBergen and driving continued improvement in our daily living business that resulted in our largest year-over-year quarterly and fiscal-year sales increases in three years. While continuing to work through pharmacy margin pressure, we were able to achieve improved top-line pharmacy growth as our retail pharmacy market share for the fiscal year increased 30 basis points to 19.0 percent. Finally, we maintained solid expense control in the fourth quarter and are moving forward with the implementation of our previously announced cost-reduction initiative to achieve $1 billion in savings by the end of fiscal 2017."

WAG’s Dividend

Walgreens most recently announced a dividend raise in August, pushing its quarterly payout from 32 cents to 34 cents. We expect the company to declare its next 34 cent dividend within the next month or so.

Stock Performance

WAG stock was up $1.40, or 2.35%, in pre-market trading. YTD, the stock is up 5.24%.

WAG Dividend Snapshot

As of Market Close on September 29, 2014

BK dividend yield annual payout payout ratio dividend growth

Click here to see the complete history of WAG dividends.

9/28/2014

Stocks: 4 things to know before the open

S&P futures 2014 09 25 Click chart for in-depth premarket data. LONDON (CNNMoney) What does the market have in store today?

Here are four things you need to know before the opening bell rings in New York:

1. Strong dollar: The U.S. dollar was strengthening versus other global currencies, and gold prices were declining by about 1%.

Simon Smith, an economist at FxPro, said the dollar's strength against other currencies is now at a level "last seen in mid-2010 when the euro was getting hammered in the early stages of the eurozone crisis."

The dollar was 0.4% firmer against the euro, continuing a recent trend driven by growing divergence in monetary policy between the U.S. and the eurozone, where the economy has stalled.

2. Bad Apple: Shares in Apple (AAPL, Tech30) were showing signs of weakness premarket after the company withdrew its latest software update following widely reported technical problems. Social media is also buzzing over customer reports that the new iPhone 6 Plus is bendable.

Apple's popular products frequently face a backlash soon after their release, but then complaints from die-hard consumers tend to calm down.

3. Mixed signals: U.S. stock futures were barely budging Thursday after posting a solid rebound over the previous session. On Wednesday, the Dow Jones industrial average gained 154 points, the S&P 500 rose 0.8%, and the Nasdaq closed 1% higher.

European stock markets were broadly firmer in early trading, tracking Wall Street's gains and helped by the dollar's strength.

But shares in retail chain H&M (HNNMY) fell by 4% in Sweden after the company warned of weak September sales because of unusually warm weather.

Asian markets ended with mixed results. The Nikkei was a stand-out performer with a 1.3% gain.

4. Earnin! gs and economics: Nike (NKE) will report quarterly earnings after the closing bell.

The U.S. government will report weekly jobless claims at 8:30 a.m. ET.

9/27/2014

Clorox: This is the One Big Change That Could Happen Under New CEO

Last night, Clorox (CLX) announced that CEO Donald Knauss would step down and be replaced by COO Benno Dorer. B. Riley’s Linda Bolton Weiser doesn’t expect any major changes other than a possible exit from Venezuela. She explains:

Clorox

After the close on 9/18, CLX announced insider Benno Dorer, 50, will become CEO effective 11/20. This is not a big surprise as Don Knauss, 63, has been CEO for eight years. Dorer started his career with Procter & Gamble (PG), joined Clorox in 2005 and was promoted to COO in 2013.  The Clorox share price has continued to go up over the years, but op. profit growth was higher and more consistent early in Knauss' tenure, with more inconsistency in recent years:  FY07 +5%, FY08 +4%, FY09 +15%, FY10 +7%, FY11 -5%, FY12 -2%, FY13 +8%, FY14 -1%, FY15E +3%.  During his tenure as CEO, Knauss acquired Burt's Bees (at a very high valuation) and several health care disinfecting businesses, and divested auto care (Armor All and STP).  He can also be credited with building Clorox's Away-from-Home and B-to-B businesses, which have been growing in the double-digits.  Early in his tenure, Knauss talked about building a bigger international business, but he didn't persist with that theme. While Knauss was CEO, Carl Icahn became involved as an activist shareholder, essentially inviting strategic and financial buyers to bid on Clorox—Clorox's board rejected Icahn's recommendation to sell the company. Icahn did not criticize how the company was being managed, but claimed the company was undervalued.  We don't expect big strategic changes under Dorer, but wonder if he will make the move to exit Venezuela, where Clorox is now unprofitable, as a higher percentage of its business is impacted by price controls than for the personal care companies.

Shares of Clorox have gained 0.5% to $90.36 at 1:22 p.m., while Procter & Gamble has risen 0.6% to $84.70.

9/26/2014

Don't panic after Bill Gross exit

bill gross morning star Is Bill Gross' future at Janus really that bright? Only time will tell. NEW YORK (CNNMoney) The bond king has left the building. Should investors run for the exits too?

Investors with money at Pimco are understandably queasy after legendary investor Bill Gross shocked the financial world by jumping ship on Friday.

Some are already yanking their cash from the $2 trillion pile that Pimco manages. Others may even follow Gross to Janus Capital (JNS) where he's poised to manage a new bond fund.

But Morningstar is warning investors to avoid overreacting.

"Now is the time to reassess, but not panic. Yes, Bill Gross -- one of the world's greatest living investors -- is leaving. But there's a deep bench behind him," said Scott Burns, global director of manager research at Morningstar.

Not telegraphed: It's clear Gross's departure caught many people off guard -- even the experts.

Morningstar placed all 50 rated Pimco funds under review on Friday to give it time to weigh the news.

"Fund managers leave but it's rare it happens at such a flagship like this. It's always better for investors when it's deliberate, planned and telegraphed," said Burns.

He said it's possible hundreds of billions in Pimco funds may leave the firm with Gross.

Of course, that's nothing new for Pimco, which has been rocked by 16 straight months of client outflows at its flagship Total Return fund. The Total Return fund is up 3.6% this year, but that's trailing its benchmark, according to Morningstar data.

Pimco's outflow problems weren't helped by the surprise departure earlier this year of former CEO Mohamed El-Erian. His exit triggered a wave of negative stories suggesting Gross's erratic behavior was to blame.

It's possible Pimco could benefit from fewer distracti! ons now that Gross is gone.

Deep bench: Morningstar stressed that Pimco has a number of capable fund managers it can rely on to fill Gross' shoes, including deputy chief investment officers Dan Ivascyn and Mark Kiesel.

Ivascyn was named fixed-income fund manager of the year in 2013 by Morningstar and Kiesel won the prestigious award the year before.

"There's a lot of depth at Pimco. It's not like his departure has left the cupboard bare," said Burns.

It's also worth remembering that Gross secured his reputation as a legend in finance after decades of success. The 70-year-old who founded Pimco back in 1971 isn't exactly a rising star anymore.

"One way or another, this was coming to an end," said Burns.

Jump to Janus? Gross's arrival at Janus is already generating serious excitement. The asset manager's shares surged 38% on Friday as Wall Street bets the blockbuster news will translate to greater profits.

It's too early to say whether mutual investors should move their money to Janus. The release revealing the Gross move was short on details and the relatively young fund he's going to manage isn't even reviewed by Morningstar.

Nor is it clear what strategy Gross plans to implement at Janus. Investors should also beware of the transaction fees that go along with moving money from one fund manager to another.

"He's not even in the saddle yet," said Burns.

Will the DOJ Pursue Big Banks After Holder Departs?

Do you hear that? That's the sound of big banks breathing a sigh of relief.

Attorney General Eric Holder is stepping down. And according to Wall Street Journal writer Deborah Solomon, his departure signals the end of the Justice Department's crusade to hold financial institutions culpable for their conduct prior to the financial crisis.

Solomon writes:

While several big banks remain in the Justice Department's crosshairs for their sale of flawed mortgage securities ahead of the 2008 financial crisis, the settlements are expected to be much smaller than the record sums extracted from Bank of America (BAC), J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C), according to people familiar with the matter.

Those still under investigation by Justice include Goldman Sachs Group Inc. (GS) and Wells Fargo & Co. (WFC). But those cases are not expected to produce the headline-catching sums like Bank of America's $16.65 billion tab, given they involve a smaller volume of mortgage securities than the other banks.

Among the signs that the big bank cases may be winding down: Tony West, who was Mr. Holder's point-man in the big bank settlement talks, recently left the Justice Department and will join PepsiCo (PEP) as its general counsel.

9/25/2014

Mortgage Rates Slip a Bit After Previous Week's Big Gain

Mortgage Rates Michael Dwyer/AP WASHINGTON --€" Average long-term U.S. mortgage rates declined slightly this week, after marking their largest one-week gain of the year the previous week. Mortgage company Freddie Mac said Thursday that the nationwide average for a 30-year loan eased to 4.20 percent from 4.23 percent last week. The average for a 15-year mortgage, a popular choice for people who are refinancing, slipped to 3.36 percent from 3.37 percent. At 4.20 percent, the rate on a 30-year mortgage is down from 4.53 percent at the start of the year. Rates have fallen even though the Federal Reserve has been trimming its monthly bond purchases, which are intended to keep long-term borrowing rates low. The purchases are set to end next month. Last week, the average rate on the 30-year loan jumped to 4.23 percent from 4.12 percent a week earlier, amid market speculation that the Fed might abandon its nearly 6-year-old policy of keeping short-term interest rates at record lows. But at their meeting that ended last Wednesday, Fed policymakers decided to keep the low rates, at least for a few more months. Fewer Americans bought homes in August, as investors retreated from real estate and first-time buyers remained scarce, data released Monday by the National Association of Realtors showed. By contrast, the Commerce Department reported Wednesday that sales of newly constructed homes surged in August, led by a wave of buying in the West and Northeast. It was the fastest sales pace since May 2008. It was seen as a clear sign of improvement for a real estate market that has been muddled in recent months, as the rebound in home sales that followed the housing bust began to slow.

9/23/2014

Walmart Spokesman Quits Over Lie on Resume

Casey Rogers/Walmart via APWalmart chief communications officer David Tovar resigned his post last week. Walmart Stores' chief spokesman David Tovar resigned after the company allegedly found that he had lied about his academic record in his resume, Bloomberg reported, citing a person familiar with the matter. While conducting a due-diligence screening, Walmart (WMT) discovered that Tovar had lied about receiving a bachelor of arts degree from the University of Delaware in 1996, the report said. An academic-records official from the University of Delaware confirmed to Bloomberg that Tovar never received the diploma. Tovar, who announced his resignation last week, couldn't be reached by phone and didn't respond to an email seeking comment. Walmart was also not immediately available for comment outside regular U.S. business hours. More from Reuters
•Producer Prices Unchanged as Inflation Remains Tame •Ali Who? Most Americans Clueless About China's Alibaba •Industrial Production Slips on Reduced Vehicle Output

More health insurers offer Obamacare plans

obamacare website 111813 NEW YORK (CNNMoney) Americans will have more choice when they shop on the Obamacare exchanges this fall for health insurance.

There will be 63 more issuers offering plans across 44 states next year, Health Secretary Sylvia Burwell announced Tuesday. That's a 25% increase from this year.

Several of the nation's largest insurers took a very cautious approach to Obamacare in its first year of operation, offering only a handful of plans in certain states. But now that 7.3 million people have enrolled, many insurers now see great potential -- and profits -- on the exchanges.

"We plan to grow next year as we expand our offerings to as many two dozen state exchanges," Stephen Hemsley, CEO of UnitedHealth Group (UNH), said this summer when announcing second quarter earnings. "This approach is consistent with our long stated plan to take a prudent first year position and then build and expand in 2015 and 2016 as these markets become more established."

Some insurers only offer plans in certain states. Residents in four states -- Indiana, Missouri, New Hampshire and West Virginia -- will have at least twice the number of issuers to chose from, while 36 states have at least one new one.

California is the only state that will see a decrease, with only 10 insurers in 2015, down from 12 this year. In total, 14 issuers are exiting the exchanges.

Open enrollment begins Nov. 15.

9/22/2014

Last Week's Biggest Stock Movers: Drug Trials and Tribulations

A sign stands outside a Rite-Aid pharmacy in Camp Hill, Penn Bradley C. Bower/Bloomberg/Getty Images In any given week, some stocks are sure to shoot up, and others will plummet. The big gainers inspire us to keep investing. The presence of the decliners keeps our greed in check while reminding us about the risks of the equity markets. Let's go over some of last week's best and worst performers. Avanir Pharmaceuticals (AVNR) -- Up 64 percent last week Last week's biggest gainer was Avanir Pharmaceuticals. The volatile biotech soared after revealing favorable clinical trials data on its AVP-923 drug candidate that treats agitation associated with Alzheimer's. This is a major hurdle cleared on the long path to gaining regulatory approval, but this is just the second of three clinical trial phases that Avanir needs to shine through to get its treatment on the market. Novatel Wireless (NVTL) -- Up 33 percent last week Novatel Wireless moved higher after IT products distributor and services provider Synnex announced an expanded deal to offer Novatel products throughout the U.S. and Canada. H.C. Wainwright followed by initiating coverage of Novatel with a buy rating and a $4 price target that it deems as conservative and one that it's likely to raise "sooner rather than later." Apogee Enterprises (APOG) -- Up 14 percent last week There weren't too many companies reporting quarterly results last week, but Apogee was one that managed to shine through. The provider of value-added glass products and services saw revenue soar 30 percent in its latest quarter. Adjusted earnings climbed 67 percent to $0.35 a share, beating Wall Street expectations. The strong showing finds Apogee raising its outlook for fiscal 2015. VirnetX (VHC) -- Down 65 percent last week The market's biggest loser was VirnetX, shedding nearly two-thirds of its value after an unfavorable patent ruling. The U.S. Court of Appeals for the Federal Circuit rejected a jury award of $368.2 million that VirnetX initially won against Apple (AAPL) in 2012 for patent infringement related to virtual private networking and FaceTime. Investors were hoping that VirnetX would not only hold on to the initial jury award but also see it expanded in light of subsequent Apple product releases. Rite Aid (RAD) -- Down 18 percent last week Drugstore operator Rite Aid posted better-than-expected results -- the chain's eighth consecutive quarterly profit -- but came undone with a problematic outlook for the balance of the year. Lower reimbursement rates and leaner margins on new generics are forcing Rite Aid to lower its profit guidance for the entire year. Rackspace (RAX) -- Down 17 percent last week Web-hosting specialist Rackspace was booted offline after announcing that it is no longer looking to be acquired. Rackspace excited investors in May by announcing that it was putting itself up on the block, but a lack of interested buyers willing to pay an acceptable premium didn't help. It also introduced a new CEO to oversee Rackspace's newfound emphasis on making things work as a stand-alone company. The market wasn't happy with the announcement. "Based on Rackspace's reaccelerated revenue growth and its potential trajectory for the coming year, the board concluded the company is best positioned to maximize shareholder value by executing its strategy as the #1 managed cloud company," the company explained. Top-line growth hasn't been an issue at Rackspace. The problem is that profitability has taken a step back in recent years as intensified competition from tech giants has resulted in margin-smashing price wars. Rackspace may think that it's better off as a swinging single, but the market doesn't seem to think so. More from Rick Aristotle Munarriz
•For Sony, It's Not 'Game Over' -- Yet •Wall Street This Week: Earnings from Nike, AutoZone and More •Could McTablets Help McDonald's Start Paying $15 an Hour?

9/21/2014

Apple set to unveil new iPhones and iWatch

The iPhone evolved   The iPhone evolved NEW YORK (CNNMoney) Tim Cook & Co. are set to unveil the latest iDevices Tuesday.

At an event in Cupertino, Calif., Apple (AAPL, Tech30) is widely expected to unveil a pair of larger iPhones, an "iWatch" smartwatch and a mobile payments system.

The two new iPhones, likely to be dubbed "iPhone 6" are rumored to have screens that measure 4.7 inches and 5.5 inches, up from just four inches on the iPhone 5S. The larger iPhones could have scratch-resistant sapphire crystal screens along with bigger batteries to power the larger displays.

The iPhones are expected to feature Apple's new iOS 8 software, a relatively minor update from iOS 7. Among the bigger iOS 8 additions is new HealthKit application that monitors users' heart rates, sleep, weight and blood pressure among other health-related information. IOS 8 will also feature HomeKit, a new platform for people to control all the items in their homes with the iPad or iPhone.

The company may also unveil an "iWatch" smartwatch, its first wearable device. The iWatch is expected to pair with the new iPhones to display notifications, and it will likely have some health and fitness features. Oh, and it will tell time too -- we're pretty sure of that.

Google (GOOGL, Tech30) has already unveiled its smartwatch software called "Android Wear." Samsung (SSNLF), Motorola, LG and other gadget makers have already launched smartwatches, which have received mixed reviews and tepid interest from consumers.

The Moto 360 in 60 (seconds)   The Moto 360 in 60 (seconds)

Apple is also expected to launch a mobile payments platform that works with the new iPhones and iWatch. Using a technology called "near field communications," or NFC, the new iDevices will be able to interact with payment terminals in a simple tap. Apple reportedly has deals in place with the major credit card companies, including American Express (AXP), MasterCard (MA) and Visa (V).

NFC chips can also be placed in stickers. NFC stickers are a convenient way to quickly change a phone's settings -- say, silence a phone with a tap of an ! NFC sticker that's on your desk. The technology has been used in Android and Microsoft (MSFT, Tech30) Windows phones for years, but Apple has resisted putting NFC in the iPhone.

9/13/2014

Cisco Systems, Inc.'s Layoffs ArenĂ¢€™t Good News

Last week, Cisco (NASDAQ: CSCO  ) dropped a financial news bomb. It plans to deliver pink slips to 6,000 employees. Sadly, this news shouldn't surprise anyone who's been watching the market for a while. Like barbecues, pools, and relaxing, lay-around vacations, Cisco's been making layoffs a summer tradition.

Many investors cut companies a break for reductions in workforces, generally assuming they will juice profits. In truth, companies like Cisco are playing a dangerous game. We can't underestimate the risks that layoffs will destroy value instead of add to it.

History repeats at Cisco
Cisco didn't deliver great results when it made its announcement. Last year, its revenue fell on an annual basis for the first time in five years , dropping 3% to $47.1 billon. Although earnings per share dropped 20%, it still generated $1.49 per share. Despite less-than-rocking numbers and the need to contend with an evolving times, the company's not exactly in dire straits.

Here's a rundown of other layoff events at Cisco.

Last June, Cisco cut 4,000 jobs. It made that move despite the fact that it was still a profitable company with cash on its balance sheet. That should have raised eyebrows. In other words, things weren't that bad, unless one is worried about short-term profits, stock price, and what Wall Street thinks. In 2012, Cisco reduced its head count by a less dramatic but still considerable 1,300 . In 2011, Cisco sent 6,500 employees packing.

This time around, CEO John Chambers said that this latest layoff isn't about putting a lid on costs, but rather, it's "investing for growth." That seems awfully flip after repeatedly utilizing this tactic and not exactly providing the kinds of results people have been looking for.

Given Cisco's profitability and the $52 billion on its balance sheet , are repeated layoffs really justified? Although many investors probably hope for some strategically smart acquisitions, many companies' acquisitions end up falling flat over years' time. Some people invest in their workers; others throw money around on window dressing that covers confused strategy.

A tech layoff triple play
Of course, despite the economic recovery that's been publicized, Cisco isn't the only tech company that's pushing people back to the unemployment office.

In May, Hewlett-Packard (NYSE: HPQ  ) announced its intention to cut 16,000 jobs. That's a breathtaking number, but it's even more shocking given its previous plan to jettison 34,000 jobs, really putting the "massive" in "mass layoffs ." Maybe these changes will improve the future, but it's still a major risk that shouldn't be ignored.

Microsoft (NASDAQ: MSFT  ) has joined the litany of major tech layoffs. A month ago, it revealed that it will reduce its workforce by 14%, representing 18,000 jobs . About 12,000 of those jobs are connected to its acquisition of Nokia, which it paid $7.2 billion for last September .

More can be lost than won
Restructuring. Right-sizing. Streamlining. Cost cutting. These words describe layoffs, but such terms and numerical descriptions deflect the concept that actual people will lose their jobs.

The problems here aren't limited to sentiment, though. The danger also relates to business strategy. Deteriorating employee morale is bad for any business. That's how managements can kill innovation, not to mention shrink the will to come to work and do a good job at all.

Engaged workers are the best workers. If they're treated well and excited about their work days, feeling appreciated and rewarded, there's far more incentive to shine.

Lost talent is another huge risk. In the case of the tech world, the new guard is well under way -- they're boosting their workforces and looking for many ways to make their employees happy. Companies like Google (NASDAQ: GOOG  ) , Facebook (NASDAQ: FB  ) , and LinkedIn (NYSE: LNKD  ) offer their employees benefits and perks that short-term cost-oriented managements would likely call insane.

There's absolutely nothing crazy about fostering a workforce that doesn't see much reason to leave; feeling appreciated and garnering more than just a paycheck builds loyalty. Why would employees love their jobs, or feel any loyalty at all, if their companies' management teams display scary, short-term strategies, and when they screw up, have axes that are apparently kept well-sharpened and ready, easily in reach.

Last but not least, employee turnover is actually a major cost, not a benefit. It's a lesson that's apparently hard learned for many corporate managers that treat people as a commodity to be used until it doesn't seem useful anymore.

Changing the perception of layoffs
Layoffs are scary; many of us know how painful it is to be shown the door. In the grander scheme of things though, more people, especially investors, should be extremely concerned about the ripple-effect ramifications of mass layoffs, especially in the companies they own. It's time for a perception change: these can be more about managements' failed strategies than anything employees did. Shareholders shouldn't accept them with bullish excitement, or a status quo shrug.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.

9/11/2014

3 Tempting Dividend Stocks Investors Might Want to Avoid

Dividend investing has long been a haven for investors who want to receive a reliable stream of income rather than wait for capital gains to materialize. Having those dividends deposited in your account each quarter alleviates concerns that you might have to sell stock at the wrong moment in order to generate income. Instead, you keep on collecting dividends even when the market is down.

Unfortunately, investors sometimes forget that not all dividend stocks are created equal. As tempting as it may be to zero in on the yields offered by Guess?, (NYSE: GES  ) , Darden Restaurants (NYSE: DRI  ) , and Starwood Hotels and Resorts Worldwide, (NYSE: HOT  ) , the business prospects of each company are uncertain enough to make them dangerous stocks to hold in conservative dividend portfolios.

It's anyone's guess if this company will turn around
Guess? distributes about half its earnings as a dividend and offers a 3.75% dividend yield. That sounds great if it's all you know about the company. However, Guess? is going through a challenging period. Operating income is down 44% over the past two years and gross margin declined five percentage points in two years. The company reported weakness across the board in last month's second-quarter earnings release. Guess? desperately needs to get back in front of fashion trends so that it can stabilize earnings.

Although Guess? might pull off a turnaround, it's not the type of stock that many dividend investors would want. If you're just looking to collect payments each quarter, you probably want a big and safe dividend. A blue chip retailer like Nordstrom might be more appropriate for a dividend portfolio because of its stability.

Desperate for diners
Like Guess?, Darden Restaurants has an enticing dividend with a dividend yield at 4.6% -- close to an all-time high. The company's stock price is down 9% so far this year, making it an interesting candidate for contrarian investors. However, dividend investors may want to steer clear despite the stock's apparent attractiveness.

High unemployment and stagnant wages for low- and middle-income households limit Darden Restaurant's ability to drive customers to its locations. Olive Garden – which generates more than half of Darden Restaurants' total sales – experienced declining  traffic and lower same-store sales in every month of fiscal 2014.

November results would have been negative had Thanksgiving Weekend not been shifted to December results. Source: Company filings.

The traffic problem is so bad that Olive Garden is resorting to gimmicks like its latest giveaway: $100 for seven weeks of pasta. USATODAY reports that all 1,000 "Never Ending Pasta Passes" sold out in 45 minutes. The company plans to promote more giveaways in the coming weeks, according to the newspaper.

No matter how much buzz the giveaways generate, Darden Restaurants' long-term financial health depends on a strengthening economy. Dividend investors ought to wait for same-store sales to improve rather than tempt fate to catch a falling knife.

The risk might be too big
Unlike Guess? and Darden Restaurants, Starwood Hotels is producing near the high end of its potential. The company earned $3.28 per share in 2013, its best result since 2006. The stock's 1.7% yield may be tempting given the company's financial success, but investors should be cautious. Starwood operates in a highly cyclical industry where earnings – and dividends – rise and fall with the economy.

Data source: Morningstar 

Although the company is expanding its geographic footprint, almost half of Starwood's available rooms are located in the United States. This could provide upside in the event that the domestic economy continues to improve, but it exposes investors to significant downside risk in another recession. In any event, dividend investors who abhor the thought of a dividend cut should avoid Starwood altogether.

Takeaway
Guess?, Darden Restuarants, and Starwood Hotels are not necessarily bad investments just because they have some hair on them. but these stocks are probably not appropriate for dividend investors who seek safety of principal in addition to high dividends. If this sounds like you, you might want to look elsewhere.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here.