CNBC's Jim Cramer explains why the writing was on the wall when it came to CenturyLink’s dividend cut.
The "Mad Money" host also checks in with the CEOs of Twilio, SendGrid and Waste Management.
In the lightning round, Cramer shares his take on two opposite side of the baking sector.
If you ask CNBC's Jim Cramer , reaching for a stock's dividend yield is one of the dumbest mistakes an investor can make.
"If you see a stock sporting a yield that's well in excess of what you can get elsewhere, I think you should be skeptical," he said Thursday on "Mad Money." "Most likely, it's not a bargain, it's a sign that the dividend is going to be cut."
Cramer flagged the cautionary tale of the stock of CenturyLink CTL , an old-school telephone and data service provider which, until recently, had the largest yield in the S&P 500. But on Wednesday, management slashed the dividend from $2.16 a share to $1.00, saying they would focus on creating value in other ways. Shares fell to a new 52-week low.
Referencing his November warning about the stock, Cramer said he saw this coming based on what happened to two other, similar companies whose stocks are now too small for him to mention on air.
"Over the years, their CEOs repeatedly told me that their dividends were safe. But ... this part of the telco industry [is] a dinosaur. Their stocks gradually went lower as their revenues shrank, making their yields seem more attractive. Management insisted that the market had it wrong and their dividends were safe," the "Mad Money" host explained.
But when their stocks went from near $100 a share to the single digits, that turned out to be totally wrong. And while CenturyLink has a better balance sheet, Cramer implored investors to learn a lesson from its cut and do their own homework.
"With CenturyLink, it was obvious to anyone with discipline that the sky-high yield was a red flag, even as many analysts failed to see the cut coming," he said. "Some things are simply too good to be true, and a stock with an 11.5 percent yield? That's one of them."
Cramer: When safety is an illusion
The action in two key stocks — Coca-Cola KO and Cisco Systems CSCO — is telling Cramer that the stocks people have long deemed to be "safe" investments might not be so safe anymore.
"The message of today is simple: old-time safety can be illusory," Cramer said as stocks fell on weak retail data . "The consumer packaged goods companies are a lot more economically sensitive than [some] of these terrific, enterprise-oriented technology plays. That's the new normal."
The "first shocker" for the "Mad Money" host came when Coca-Cola, a staple of the historically "safe" consumer goods cohort, issued a bleak forecast for 2019 . CEO James Quincey attributed the guidance cut to macroeconomic pressures, which don't usually affect the beverage giant. Shares of the company had their worst trading day since 2008.
At the same time, Cisco Systems — which investors have long seen as a company hostage to the macroeconomic environment because companies can put off purchasing its multi-million-dollar products when business slows — issued a strong earnings report , raising its forecast, upping its dividend and bolstering its share buyback plans.
To Cramer, this meant that "digital technology has become so essential," he said.
Twilio's $2 billion purchase of SendGrid will be a "one plus one equals five" situation as the companies merge their operations to better serve their customers, SendGrid's CEO told Cramer in a joint interview with the CEO of Twilio TWLO .
"We believe companies like Airbnb and the 140,000 other … total companies that we serve in our Twilio family now, they're going to need an ability to orchestrate communications, different ways to engage with their users, over a myriad of channels," SendGrid chief Sameer Dholakia said on "Mad Money." "So we're excited about the combination."
Twilio co-founder, Chairman and CEO Jeff Lawson, whose company delivered 77 percent year-over-year revenue growth in the fourth quarter, doubled down on the utility of his expanding platform. He also explained that Twilio's communications software isn't just used by tech-savvy giants like Airbnb and Uber.
Click here to watch and read more about their full interview.
Cramer's apparel stock review
Now that most of the retail industry's earnings reports have been filed, Cramer found it worth reviewing the quarterly results from some of the top names in apparel to see which ones won out in recent months.
Ralph Lauren RL , Michael Kors parent Capri Holdings CPRI and Columbia Sportswear COLM took the top spots in his book after surprising to the upside, with Columbia delivering "the single best quarter of any of these companies," Cramer said. Coach parent Tapestry TPR and Canada Goose GOOS-CA , on the other hand, issued results that he called "downright ugly."
"We now have a much better idea of which apparel stocks will work, will rock, in 2019, which is why I want to walk you through them, one by one, [and] offer some color commentary," Cramer said Wednesday.
Click here to read his full take.
Waste Management CEO on millennials
The prospect of a mostly millennial workforce has even trash and recycling giant Waste Management WM in preparation mode, the company's President and CEO Jim Fish told Cramer in a Thursday interview.
"We're looking at, what happens when millennials start kind of becoming the biggest part of the workforce? Everybody's talking about it, right? And they all play Fortnite," Fish joked on "Mad Money."
Waste Management's pilot project with Caterpillar tries to get at the answer. The companies are testing remotely operated heavy equipment in an effort to get ahead of the next generation of workers.
"You've got somebody sitting in a room that's remotely operating it, sitting in front of a bank of TV screens, and it is similar to playing a game, really, so it kind of lends itself to the next generation," Fish explained.
Click here to watch his full interview after earnings, which rocketed Waste Management's stock to a new all-time high.
Lightning round: What you can bank on
In Cramer's lightning round , he zipped through his responses to callers' stock questions:
Global Payments Inc. GPN : "We like the payments space. It's one of the big ones. We have to refresh and do more on the payments space, including Square SQ , which everybody likes, MasterCard MA and Visa V ."
Q2 Holdings Inc. QTWO : "There are too many virtual banking solutions. I've got to be sure before I recommend them that they really do work."
Disclosure: Cramer's charitable trust owns shares of Cisco Systems.
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