Most of the time it is best to show why I would buy a dividend-paying stock. It is something like how investigators are trained to recognize a counterfeit $100 bill. They spend a lot of time carefully studying real currency so that a fake $100 bill is more easily identified. Nevertheless, identifying a bad investment can also be instructive.

This morning I saw a Fidelity news post that recommended a series of stocks in an article with the title “7 safe dividend stocks for investors to buy right now.” The list included XOM, BP, KHC, HRL, TAP, WFC and PACW. While I own XOM, it is not for the faint of heart. I am sometimes tempted by HRL and we have owned it in the past. I was not as familiar with TAP (Molson Coors Brewing Company) so I did a quick look at earnings and dividends. The two questions are always, 1) are the earnings growing and 2) are the dividends growing?

These pictures tell the story. Note the quarter-to-quarter earnings comparisons. Also see that the dividend flat-lined. That is often a sign of some struggle. Boards do not increase dividends if they think they will have to reduce them at some point. Why wait for improvement? It is better to buy a company with improving earnings and improving dividends. One you might want to consider instead of TAP is DRI: Darden Restaurants.

Earnings don’t look promising for TAP
Flat-lined dividends is a warning sign.
The payout ratio for a consumer company shouldn’t be over 70%.

Link to Wallmine for TAP: