Steer Clear of This Dividend

Visteon (VC Quote) discontinued its 6-cent quarterly dividend last week, wiping out value investors' hopes of collecting the 2.5% yield. The auto components maker had paid a dividend since the summer of 2000, when the company was spun out of Ford (F Quote). Management said the move will save $32 million annually, a cost-cutting move that's necessary as Visteon has failed to post a full year of positive net income in its short life as a public company.

So, could Delphi (DPH Quote), General Motors' (GM Quote) equivalent components-maker spinoff, be the next to cut its own 7-cent quarterly dividend (a 3.9% yield)? I believe the answer is yes, and that investors should avoid bottom-fishing with the stock here around $7.

Since its 1999 IPO, Delphi's earnings record has been just as volatile as Visteon's. And even though both of these companies sell to customers other than their former parent company, GM still accounts for about 50% of Delphi's total revenue, which makes it highly dependent on that automaker's fortunes. ...