There are plenty of good-quality dividend stocks on the ASX. But where there is good, there is also often bad. Choosing the wrong dividend shares can be disastrous for both your income stream and your capital base.
So today, let's discuss two ASX dividend stocks that I wouldn't touch with the proverbial 10-foot pole in 2023.
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2 ASX dividend shares I wouldn't touch in 2023
AGL Energy Limited (ASX: AGL)
AGL has been an absolute disaster of an investment over the past five years or so. Back in 2017, AGL shares were trading above $27 each. Today, this energy utility share is under $8:
That's not quite as bad as the near-$5 pricing we were seeing back in late 2021. But we are still a long way from this company's heyday. AGL has been in the eye of the energy storm in recent times.
The need to rapidly shift away from fossil fuels for energy has resulted in many of AGL's generation assets losing most of their value. The company's plans to demerge last year also faced stiff resistance from shareholders and resulted in a big shakeup at the company after the plans were abandoned.
AGL's dividends haven't escaped the pain either. AGL used to be an ASX dividend heavyweight. But the company went from paying out $1.19 per share in 2019 to the 26 cents per share that investors received last year.
AGL might yet have a strong future in front of it as a renewable energy powerhouse. But I seriously doubt that this company will be anything close to a market-beater any time soon. As such, this is one ASX dividend stock I am staying away from in 2023.
Magellan Financial Group Ltd (ASX: MFG)
Another ASX 200 dividend stock I'm avoiding this year is the fund manager Magellan. It was only a few years ago that this company was flying high at over $74 a share. But since then, Magellan has endured one of the most dramatic falls from grace in ASX 200 history:
First, the company's popular funds, such as the Magellan Global Fund (ASX: MGF), began lagging behind their benchmarks in terms of returns. But the departure of co-founder and former star stock picker Hamish Douglass really dented confidence in the fund manager. As did the loss of several high-profile clients.
It didn't help matters when Douglass began offloading large tranches of shares, after previously saying that any talk of share sales was "absurd".
Magellan has since shaken up its management team and promised its investors that it has refocused on delivering outperformance. But the company's steep losses in funds under management will cripple Magellan's ability to pay dividends for years.
As my Fool colleague reported earlier this month, Magellan managed an average of $53.8 billion in funds under management over the six months to 31 December last year. That was less than half of the $112.7 billion it managed over the same period in 2021.
So this is another ASX 200 dividend stock I would rather not tangle with this year.
