On the surface, Sunoco LP (NYSE: SUN) seems like it should be an attractive company to yield lovers like me since it currently offers an eye-catching 10.5% yield. However, the beauty of that payout is only skin-deep because of the company's troubling financial situation. While the convenience store operator and fuel distribution company is in the process of completing a major fix that will help address its issues, that doesn't appear to be enough. That's why this is one high-yield stock that I still won't go near.
Sunoco's issues are twofold. First of all, the company took on an enormous amount of debt to complete a slew of acquisitions over the past few years, including spending billions on dropdown transactions with Energy Transfer Partners (NYSE: ETP). While these deals have significantly improved the company's size and scale, they weighed it down with more than $4.4 billion of debt. As a result, its leverage ratio was an unsightly 5.97 times last quarter, which is well above the 4.0 times that's considered safe for a master limited partnership.
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Source: Fool.com