Don't Fall for These 2 Dividend Stocks: Cuts Are Coming
Often, when a stock has a high and rising dividend yield, it's a red flag that the dividend may not be sustainable. That's because the yield is based on the share price, so when the yield shoots higher, it could be due to the fact that the share price has plummeted -- making the yield a larger percentage of the share price by default.
And when the share price goes down, that typically means the company may be struggling or that earnings or other performance metrics are down. Now, this is not always the case with rising yields, but it is something to monitor. But if a rising yield does reflect trouble, then it could signal that a dividend cut may be coming.
This is exactly what happened recently with two popular dividend stocks, Intel (NASDAQ: INTC) and Annaly Capital Management (NYSE: NLY). Both announced that they are reducing their dividends, with cuts coming in the second quarter.
Source Fool.com
