Furniture Yields Won't Polish Your Returns

Management has attempted to address this issue by cutting costs. Just last month, La-Z-Boy announced it will close three plants and eliminate 500 of its 11,350 jobs. That said, these moves may prove too little, too late to save the dividend without diluting current investors. The company had just $17.5 million in cash on the balance sheet at the end of the January quarter, compared with $166 million of debt.

At Wednesday's closing price of $12.40, the stock is actually up 4.5% year-to-date, outperforming the broader market averages. That surge doesn't change my mind; it just adds to my conviction that investors should take a pass on the opportunity to purchase La-Z-Boy.

These two companies are on the front lines of the housing market and will be among the first hurt if new-home sales continue to slow and if lenders become more strict about folks taking equity out by refinancing their mortgage. But the ties to housing may not matter, in a bad way. In the last several years, furniture makers' margins were crushed even when the housing market was booming because of price competition from cheaper manufacturers overseas.

With that in mind, I suggest not chasing the rising dividend yields in this group.

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David Peltier is a research associate at TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback; click here to send him an email.

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