High Yield Traps: Four High Dividend Stocks at Risk of Reduced Yields

Dividends are a critical part of an investor's annualized returns. High dividend yield stocks have a strong history of outperforming the S&P 500. This happens usually because a high dividend yield arises from a mature, highly profitable company that is able to pay out earnings to shareholders. However, this is not always the case. High yields may also be caused by the decline in stock price of a distressed company or the collapse of economic fundamentals within its industry. Exemplified by the dividend reduction and crash of World Wrestling Entertainment (WWE) in the past month, some stocks of fundamentally weak companies have deceptively high dividends that can lure an investor who does not do his or her homework. Below I have listed four companies that pay out dividends higher than their earnings per share and/or are at risk of dividend cuts. Dividend cuts usually also coincide with a decrease in... Read more