Q3 2022 Worst Performing Stocks – Week in Review

Q3 2022 Worst Performing Stocks

The stock market continues to decline, and the worst performing stocks in Q3 2022 continue to set new lows. As a result, investors continue to ask themselves, “Are We in a Recession?” The short answer is technically yes because we have had a contraction of two consecutive quarters of Gross Domestic Product (GDP). But the answer is more complicated because of low unemployment and continued job growth. In any case, investors continue to move money from stocks into cash since bonds are not a refuge.

Q3 2022 Stock Market Overview

Despite the recent downturn in September, the trailing 3-months were not that bad based on data from Stock Rover*. The chart below shows that crude oil performed the worst, followed by gold. The Dow 30 was performing well until recently but had a poor quarter. On the other hand, the Nasdaq’s performance picked up on a relative basis.

The best performing sectors were Consumer Cyclical and Energy, while the worst were Communication Services and Real Estate.

However, there are many poorly performing stocks this year and year-to-date. We discuss the three worst performing stocks in varying dividend growth categories.

Dow 30

The Dow Jones Industrial Averages (DJIA) had an awful quarter and was down about (-9.3%) in aggregate. The Q3 2022 worst performing stocks were Intel (INTC), Verizon (VZ), and Nike (NKE). Intel and Verizon are also in the Dogs of the Dow 2022.

Intel has been slammed because of the slowing PC and server markets and more competition. Thus, the stock was down a whopping (-30.4%).

Verizon (VZ) was down because of declining cellular customers combined with significant 5G competition from T-Mobile (TMUS). The stock is down (-24.2%), but the dividend yield is up to 6.87%, the highest in a decade. Verizon is a blue-chip stock and Dividend Contender with a modest payout ratio of ~47%. Verizon is a good dividend stock for those seeking income.

Nike (NKE) had one of its worst days in years and was down (-12.2%) this past Friday. The sports apparel and footwear company is trying clear inventory, and margins plummeted. Moreover, China’s economy is struggling because of lockdowns, drought, and a collapsing property market.

Dividend Kings

The Dividend Kings 2022 were down about (-5.8%) in the quarter. The Q3 2022 worst performing stocks were Stanley Black & Decker (SWK), Cincinnati Financial (CINF), and Universal (UVV).

Stanley Black & Decker is struggling with a slowing home market. As a result, the dividend yield is the highest in a decade at ~4.25%, more than double the 5-year average.

Cincinnati Financials’ underwriting profit is shrinking. As a result, the stock price declined (-24.2%) in Q3 2022, but if the economy enters a recession, it will probably fall further.

Universal’s business is under pressure because of the secular decline in smoking. Hence, the stock price is down about (-22.9%) in Q3 2022. Universal has been overly generous with its dividend; thus, the yield is the highest of the Dividend Kings. But the payout ratio is near 90%, and leverage has been rising, placing the dividend at risk of a cut.

Dividend Champions

As a group, the Dividend Champions are down (-3.9%) in Q3 2022. The three worst performing Dividend Champions in the quarter are the same as the Dividend Kings.

Dividend Aristocrats

The 64 Dividend Aristocrats in 2022 are down (-5.7%) in the quarter. The worst performing ones are V.F. Corporation (VFC), Stanley Black & Decker, and Cincinnati Financial.

V.F. Corporation (VFC) is struggling with slowing sales and high inventories. Hence, the stock price has fallen (-32.5%) in the quarter alone. Inflation affects the stock market broadly, but specific stocks, like V.F. Corporation, sell discretionary clothing, and inflation will greatly affect sales. That said, VFC is an undervalued Dividend Aristocrat, and the dividend yield is the highest in a decade at ~6.68%.

Dividend Contenders

The 2022 Dividend Contenders have declined about (-8.4%) in the quarter. The three worst performing stocks in Q3 2022 are Scotts Miracle-Gro (SMG), Hyster-Yale Materials Handling (HY), and Healthcare Services Group (HCSG).

Scotts-Miracle Gro is down a whopping (-45.4%) in the third quarter because of high inventory, guidance cuts, and high leverage. Consequently, investors should probably stay away.

Hyster-Yale Materials’ stock price declined (-32.5%) in the quarter alone. In addition, the company’s cash flow and earnings are negative, and bookings are trending down. Hence, investors should probably not consider this stock, and the dividend is at risk.

Healthcare Services Group’s stock price fell (-29.6%) in Q3 2022 because of declining revenue and earnings. The pandemic affected the firm’s business and has not yet recovered.

Dividend Challengers

The Dividend Challengers in 2022 have performed relatively well in the quarter, declining only (-4.0%). Conversely, the three worst performing stocks in Q3 2022 were Rocky Brands (RCKY), Medifast (MED), and TTEC Holdings (TTEC). Moreover, all three stocks are struggling with inflationary pressures and growth issues.

Final Thoughts on Q3 2022 Worst Performing Stocks

It has been a challenging year, and Q3 2022 was the third quarter with negative returns. Inflationary pressures, rising interest rates, record-breaking drought, China, and the War in Ukraine continue to pressure stocks.

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The Stock of the Week

Today we highlight Nike (NKE), the sportswear and sneaker giant. According to Stock Rover*, the stock price has fallen about (-49.7%) this year and (-42.2%) in the trailing 1-year, making it one of the worst performing stocks in 2022. Nike faces issues with high inventories, falling sales in China, and high inflation.

The forward dividend yield is about 1.47%, and the dividend is covered by a conservative payout ratio of about 32%. The price-to-earnings ratio is about 27.52X, below the 10-year range and within the five-year span. Although likely overvalued, investors should keep this stock on their watch list.

Dividend Increases and Reinstatements

Search for a stock in the list of dividend increases and reinstatements. This list is updated weekly. In addition, you can search for your stocks by company name, ticker, and date.

Dividend Cuts and Suspensions List

The dividend cuts and suspensions list was most recently updated at the end of September 2022. As a result, the number of companies on the list has risen to 573. Thus, well over 10% of companies that pay dividends have cut or suspended them since the start of the COVID-19 pandemic. The list is updated monthly.

Six new additions indicate companies are experiencing solid profits and cash flow in August.

The new additions were Invesco Mortgage Capital (IVR), Steelcase (SCS), Sturm, Ruger & Company (RGR), and TPG (TPG).

Market Indices

09/30/22

Dow Jones Industrial Averages (DJIA): 28,726 (-2.92%)

NASDAQ: 10,576 (-2.69%)

S&P 500: 3,586 (-2.91%)

Market Valuation

The S&P 500 Index is trading at a price-to-earnings ratio of 18.12X, and the Schiller P/E Ratio is about 26.84X. These multiples are based on trailing twelve months (TTM) earnings.

Note that the long-term means of these two ratios are approximately 16X and 17X, respectively. 

The market is still overvalued despite the recent market correction and a bear market. However, we are nearing the long-term averages. Earnings multiples of more than 30X are overvalued based on historical data.

S&P 500 PE Ratio History

Shiller PE Ratio History

Stock Market Volatility – CBOE VIX

This past week, the CBOE VIX measuring volatility was up about 1.5 points at 31.62. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 Index options. It is commonly referred to as the fear index.

Yield Curve

The two yield curves shown here are the 10-year US Treasury Bond minus the 3-month US Treasury Bill from the NY York Fed and the 10-year US Treasury Bond minus the 2-year US Treasury Bond from the St. Louis Fed.

Economic News

The U.S. Census Bureau reported that new orders for durable goods decreased by $0.6 billion or 0.2% to $272.7B in August. This decline follows a 0.1% decrease in July. Total durable-goods orders are up 10.9% year over year. Orders for non-defense aircraft dragged down the headline number, plunging 18.5%. This decrease was partially offset by a 31.2% increase in defense aircraft. Bookings for motor vehicles increased slightly by 0.3% after a flat reading the previous month. Excluding defense, new orders decreased by 0.9%. Transportation equipment decreased $1.0B (-1.1%) in August and follows a 0.7% drop in July. New orders rose marginally in every major category except for fabricated metal parts. New capital goods orders fell 0.8%, while non-defense capital goods dropped 2.7%.

The U.S Census Bureau reported that sales of newly built homes soared 28.8% in August from a revised July rate of 532,000. The August seasonally adjusted annual rate of 685,000 is a 5-month high and is down a slight 0.1% from a year earlier. Regionally new home sales increased across the board, led by the Northeast (+66.7%), then South (+29.4%), West (+27.5%), and Midwest (+16.7%). The average sales price for a new home sold in February was $521,800, down 6.3% from the previous month. The median price was $436,800, down 6.4% from July but up 8.04% from a year ago.

The US Energy Information Administration reported US commercial crude oil stockpiles decreased by 0.2M barrels to 430.6M (2% below the five-year average) on September 23rd. Crude oil refinery inputs averaged 15.8M barrels per day, a decrease of 604K per day compared to the previous week’s average. Gasoline inventories decreased by 2.4M barrels (6% below the five-year average).

Thanks for reading Q3 2022 Worst Performing Stocks – Week in Review!

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