Bond Market Defies Fed Predictions, Three Dividend Stocks Get Sold

Kevin Warsh has been talking tough on inflation, but the bond market is calling his bluff. This battle between the Fed and the bond market will result in turbulence for markets until it's resolved.

A contrarian approach suggests that when markets are roiled, perfectly good payers get tossed aside. In this case, three such payers are UPS, Nike, and Vail Resorts.

UPS's stock has been stuck in reverse since its July 28 earnings report, with a high yield of 6.4% built on shaky ground. The company's dividend accounts for 99% of its last 12 months of free cash flow, which is unsustainable given management's guidance to $5.4 billion in payouts this year.

Nike's dividend Aristocrat status may be short-lived due to a slowing payout growth rate and a trend of increasing FCF payout ratio from 27% five years ago to 110% today.

Vail Resorts has a historically unpredictable business, with revenue and cash flow affected by winter snowfall. The company's dividend has flatlined, and investors have lost hope for further growth due to high debt levels and shrinking cash reserves.