These 3 Stocks Have Embarrassingly Low Dividends

By Dan Caplinger Markets Fool.com

Income investors appreciate stocks that pay lucrative dividends, and recently, many companies have seen the value in treating shareholders well by boosting their regular payouts. Yet a few holdouts simply don't show their appreciation for their investors through dividends. For whatever reason, rather than having no dividend at all, Joy Global (NYSE: JOY), Textron (NYSE: TXT), and Global Payments (NYSE: GPN) maintain the tiniest of quarterly payments. Let's look more closely at these stocks to see why they do what they do with their dividends.

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Dividend stocks with rock-bottom yields

Stock

Dividend Yield

Joy Global

0.14%

Textron

0.16%

Global Payments

0.05%

Data source: Yahoo! Finance.

Joy Global's fight against a tough commodity market

Joy Global wasn't always as stingy in returning capital to shareholders as it is now. As recently as late 2015, the company paid a respectable $0.20-per-share quarterly dividend, which at current prices would have worked out to a yield of more than 2.8%. However, Joy Global suffered greatly from the downturn in the commodities market, because it relies on healthy conditions in the mining industry to support customer purchases of its mining equipment. When both precious metals and base metals plunged from highs earlier in the decade and coal prices remained at rock-bottom levels for an extended period, Joy Global had to adjust its financial practices, and cash was at a premium.

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As a result, in December 2015, Joy Global announced it would slash its dividend to $0.01 per share. By doing so, it said it would save $75 million in annual cash outlays at a critical time for balance sheet management for the company.

Last July, however, Joy Global received a buyout offer from Komatsu, which if approved will pay shareholders $28.30 per share in cash. Joy Global shareholders have already voted in favor of the deal, and now it's up to regulators to give their consent. With challenging conditions continuing in the industry, dividend investors will enjoy the opportunity to redeploy capital from Joy Global elsewhere in order to boost their income.

How Textron's dividend lost altitude

Textron's dividend woes go back a lot further than Joy Global's. During the financial crisis in 2008, Textron had to make tough decisions about its fiscal condition, and it reduced its dividend by more than 90% from $0.23 to $0.02 per share. Textron's dividend yield throughout most of its history has been lackluster at best, often below the 2% mark, but the cut made it essentially nil. The aircraft manufacturer said that it needed to "enhance capital for long-term flexibility" as demand for business jets dried up.


Image source: Textron.

After the cut, Textron focused largely on reducing its debt load. In 2013, when asked about the dividend, CEO Scott Donnelly prioritized paying down debt as the biggest capital requirement. More recently, questions about restoring the payout have come up, but Textron has looked more at opportunistic stock buybacks rather than a permanent increase in the payout. Even as the company gets more profitable, Textron investors shouldn't expect a return to higher dividend payments in the near future.

Global Payments: A long history of minimal dividends

Finally, Global Payments weighs in with the lowest dividend yield of these three stocks. Investors can't point to a dividend cut at Global Payments to blame for its low yield, because the company has never made one. Rather, the electronic payment network company started out with its $0.01-per-share payout when it first went public, and it has never made any changes to it.

Global Payments has indicated that it prefers stock buybacks as a more efficient way to return capital to shareholders. In 2013, when asked about the dividend, CEO Jeffrey Sloan said, "For the foreseeable term, we'll probably have a nominal dividend yield, because we prefer to have the flexibility to return it to shareholders [through share purchases." As long as Global Payments thinks that it will have better uses for deploying capital back into its business and prefers buybacks, dividend investors shouldn't expect the satisfaction of a payout hike.

These three stocks have such low dividend yields that they're embarrassing, yet none of them is likely to change its ways. Joy Global is likely to disappear as a public company once its Komatsu deal goes through, and Textron and Global Payments have delivered solid total returns to their investors over the past five years, satisfying all but the most ardent of dividend investors.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Global Payments. The Motley Fool has a disclosure policy.