Why I’m NOT Buying This Dividend Stock

A blue chip stock that’s down year-to-date and yielding 3.25%, what’s not to like?

A lot actually, depending on your investment goals.

Nestlé ($NSRGY) is a consumer staples mammoth. The company owns a massive portfolio of recognizable, household brands. And the firm is so ubiquitous that Nestlé is actually the world’s largest food and beverage company.

So far so good…

Nestlé stock is also down year-to-date, and even down over the past five years, which makes the company look like a compelling value play.

“Buy the world’s biggest food conglomerate while it’s cheap” sounds like a good idea, especially in a historically overvalued market. And Nestlé stock will likely recover in the long-run, but the company has a few “secret drawbacks” that investors should know about — especially when buying and holding for dividend income.

While Nestlé offers a 3.25% starting dividend yield, the company is subject to a 35% Swiss withholding tax.

Instead of collecting a $3.28 per share dividend, which is what Nestlé pays according to Seeking Alpha, investors would earn $2.13 per share. At the current stock price, this works out to around a 2.13% starting yield. While this isn’t terrible, there are plenty of other consumer staples paying higher…