10 Overly Dangerous Shares With Too Excessive Dividend Yields

Revealed on February eleventh, 2025 by Bob Ciura

All completely different points being equal, the higher the dividend yield, the upper.

It’s true – in isolation, there’s no such issue as “too extreme” of a dividend yield. The upper the dividend yield, the additional cash you is perhaps paid in your funding. Getting a greater yield in your funding {{dollars}} is a good issue.

With this in ideas, we compiled a list of extreme dividend shares with dividend yields above 5%. You probably can receive your free copy of the extreme dividend shares guidelines by clicking on the hyperlink beneath:

The problem is, nonetheless, that “all completely different points being equal” under no circumstances seems to pan out in precise life.

Within the true world, a very extreme dividend yield typically is a sign of distress; a pink flag that requires extra investigation. With this in ideas, earnings merchants ought to aim to avoid dividend cuts or elimination as loads as potential.

The subsequent guidelines represents the ten riskiest extreme dividend shares inside the Constructive Analysis Evaluation Database.

The ten dividend shares beneath have dangerously extreme yields above 10%, and lack the fundamental energy to help their payouts over the long run.

The shares all have Dividend Menace Scores of ‘D’ or ‘F’ (our lowest grades) inside the Constructive Analysis Evaluation Database, with payout ratios above 70%, and each keep or promote rankings from Constructive Dividend.

The guidelines is sorted by current yield, from lowest to highest.

Desk of Contents

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Overly Harmful Extreme Dividend Stock #10: PennantPark Floating Cost Capital (PFLT)

PennantPark Floating Cost Capital Ltd. is a enterprise progress agency that seeks to make secondary direct, debt, equity, and mortgage investments.

The fund moreover objectives to take a place by way of floating price loans in private or thinly traded or small market-cap, public middle market companies, equity securities, hottest stock, widespread stock, warrants or decisions acquired in reference to debt investments or by way of direct investments.

On November 26, 2024, PennantPark Floating Cost Capital reported sturdy outcomes for the fourth fiscal quarter of 2024, with core net funding earnings of $0.32 per share. The portfolio grew 20% quarter-over-quarter, reaching $2 billion as a result of the company deployed $446 million all through 10 new and 50 current companies.

Investments carried a imply yield of 11%, reflecting the continued energy of the middle market lending environment. After the quarter, PFLT remained full of life, investing an additional $330 million at a yield of 10.2%.

Click on on proper right here to acquire our newest Constructive Analysis report on PFLT (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #9: Xerox Firm (XRX)

Xerox Firm traces its lineage once more to 1906 when The Haloid Photographic Agency began manufacturing photographic paper and instruments. By way of a set of mergers and spinoffs, the Xerox everyone knows proper this second was formed.

Xerox spun off its enterprise processing unit in 2017 (now known as Conduent) and now focuses on design, progress, and product sales of doc administration methods.

Xerox reported third quarter earnings on October twenty ninth, 2024, and outcomes have been horrible, sending the stock spiraling lower. Revenue fell 7.3% year-on-year to $1.53 billion, missing estimates by $100 million. Adjusted earnings-per-share received right here to 25 cents, missing estimates by better than 50%, which had been set at 51 cents.

Unadjusted earnings included a non-cash after-tax goodwill impairment price of $1 billion, or $8.16 per share, along with a further $161 million, or $1.29 per share, that was related to the establishment of a valuation allowance.

Click on on proper right here to acquire our newest Constructive Analysis report on XRX (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #8: Arbor Realty Perception (ABR)

Arbor Realty Perception is a nationwide mortgage precise property funding perception (REIT) that acts as a direct lender and operates in two reporting segments: Firm Enterprise and Structured Enterprise. The idea offers mortgage origination and servicing for multifamily, seniors housing, healthcare, and completely different quite a few enterprise precise property belongings.

Arbor Realty’s explicit focus is government-sponsored enterprise merchandise, although its platform moreover consists of enterprise mortgage backed securities (CMBS), bridge and mezzanine loans, and hottest equity issuances.

Arbor Realty Perception, Inc. (ABR) reported third-quarter 2024 outcomes with net earnings of $0.31 per diluted widespread share, matching expectations, and distributable earnings of $0.43 per share. Revenue reached $88.81 million, a 17.23% year-over-year decrease nevertheless nonetheless beating estimates by $3.10 million.

The company declared a cash dividend of $0.43 per share and launched firm mortgage originations totaling $1.1 billion, supporting a $33.01 billion servicing portfolio, which grew 10% year-over-year. Structured mortgage originations reached $258.5 million, contributing to a $11.57 billion portfolio.

Click on on proper right here to acquire our newest Constructive Analysis report on ABR (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #7: Prospect Capital (PSEC)

Prospect Capital Firm is a Enterprise Enchancment Agency, or BDC, that provides private debt and private equity to middle–market companies inside the U.S.

The company focuses on direct lending to proprietor–operated companies, along with sponsor–backed transactions. Prospect invests primarily in first and second lien senior loans and mezzanine debt, with occasional equity investments. 

Provide: Investor Presentation

Prospect posted first quarter earnings on November eighth, 2024, and outcomes have been weak. Nonetheless, the huge info was a 25% dividend reduce. Prospect decreased its payout to 54 cents per share yearly, sending the stock reeling.

Internet funding earnings was 21 cents per share in Q1, and revenue was $196 million. That was down 17% year-over-year.

The company is inside the midst of rotating its approach to emphasize first lien senior secured lending as an alternative of precise property investments and collateralized mortgage obligations, or CLOs.

Click on on proper right here to acquire our newest Constructive Analysis report on PSEC (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #6: New York Mortgage Perception (NYMT)

New York Mortgage Perception acquires, invests in, funds, and manages mortgage-related belongings and completely different financial belongings. The idea doesn’t private bodily precise property, nevertheless barely seeks to deal with a portfolio of investments that are precise property related.

The idea invests in residential mortgage loans, multi family CMBS, hottest equity, and three approach partnership equity.

New York Mortgage Perception posted third quarter earnings on October thirtieth, 2024, and outcomes have been ahead of expectations, nevertheless nonetheless pretty weak.

Adjusted earnings-per-share received right here to 39 cents, which was 36 cents ahead of sharply lowered estimates. Internet curiosity earnings, which is akin to prime line revenue, was $20.24 million, ahead of $16.79 million from the year-ago interval.

The quarter seen the idea purchase $372 million in Firm RMBS with a imply coupon of 5.33%. In addition to, the idea purchased $624 million in residential loans with a imply gross coupon of 9.72%.

Click on on proper right here to acquire our newest Constructive Analysis report on NYMT (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #5: B&G Meals, Inc. (BGS)

B&G Meals, Inc. is a consumer staples agency with operations inside the U.S., Canada, and Puerto Rico. A couple of of the agency’s well-known producers embody Inexperienced Massive, Cream of Wheat, Cary’s, Ortega, Mrs. Dash, and Maple Grove Farms, with 50+ producers in entire.

It product portfolio focuses on shelf-stable, frozen and snack producers. On December 1st, 2020, B&G Meals achieved the acquisition of Crisco.

B&G Meals reported third quarter 2024 outcomes on November fifth, 2024, for the interval ending September twenty eighth, 2024.

For the quarter, the company recorded net product sales of $461 million, an 8% decrease as compared with Q3 2023, largely due to lower amount and the Inexperienced Massive U.S. shelf-stable product line divestiture. Adjusted net earnings equaled $10.1 million or $0.13 per share as compared with $20.5 million or $0.27 per share in Q3 2023.

B&G Meals decreased 2024 steering as soon as extra and now expects $1.920 billion to $1.950 billion in net product sales and adjusted EPS between $0.67 to $0.77 (from $0.70 to $0.90 beforehand).

Click on on proper right here to acquire our newest Constructive Analysis report on BGS (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #4: ARMOUR Residential REIT (ARR)

ARMOUR Residential invests in residential mortgage-backed securities that embody U.S. Authorities-sponsored entities (GSE) akin to Fannie Mae and Freddie Mac.

It moreover consists of Ginnie Mae, the Authorities Nationwide Mortgage Administration’s issued or assured securities backed by fixed-rate, hybrid adjustable-rate, and adjustable-rate residence loans.

Unsecured notes and bonds issued by the GSE and the US Treasury, money market units, and non-GSE or authorities agency-backed securities are examples of various types of investments.

Provide: Investor presentation

On October 23, 2024, ARMOUR Residential REIT launched its unaudited third-quarter 2024 financial outcomes, reporting a GAAP net earnings obtainable to widespread stockholders of $62.9 million, or $1.21 per widespread share. The company generated an internet curiosity earnings of $1.8 million and distributable earnings of $52.0 million, equal to $1.00 per widespread share.

ARMOUR achieved a imply curiosity earnings of 4.89% on interest-earning belongings and an curiosity value of 5.51% on widespread interest-bearing liabilities. The monetary net curiosity unfold stood at 2.00%, calculated from an monetary curiosity earnings of 4.44% minus an monetary curiosity expense of two.44%.

All through the quarter, ARMOUR raised $129.4 million by issuing 6,413,735 shares of widespread stock by way of an at-the-market offering program and paid widespread stock dividends of $0.72 per share for Q3.

Click on on proper right here to acquire our newest Constructive Analysis report on ARMOUR Residential REIT Inc (ARR) (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #3: Kohl’s Firm (KSS)

Kohl’s traces its roots once more to a single retailer: Kohl’s Division Retailer in 1962. Since then, it has grown right into a frontrunner inside the space – offering ladies’s, males’s and kids’s apparel, housewares, tools, and footwear in extra than 1,100 retailers in 49 states. The company should generate roughly $16 billion in product sales this yr.

From 2007 by way of 2018, Kohl’s was able to develop earnings-per-share by about 4.7% yearly. Nonetheless, it have to be well-known that this was pushed by the company’s intensive share repurchase program. Over that interval the share rely was virtually halved, a reduction price of -5.6% per yr.

With the share repurchase program having been paused, we don’t see that as a tailwind at the moment. Fears of struggling margins have confirmed to be correct, as a result of the previous couple of years have seen declining profitability. We discover that 2021’s earnings has the potential to be the very best for some time.

We forecast earnings-per-share at $1.85 this yr as the company is seeing weakened demand come to fruition, and important margin headwinds, along with loads weaker product sales.

Click on on proper right here to acquire our newest Constructive Analysis report on KSS (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #2: Orchid Island Capital (ORC)

Orchid Island Capital is a mortgage REIT that’s externally managed by Bimini Advisors LLC and focuses on investing in residential mortgage-backed securities (RMBS), along with pass-through and structured firm RMBSs.

These financial units generate cash motion based on residential loans akin to mortgages, subprime, and home-equity loans.

Provide: Investor Presentation

The company reported an internet earnings of $17.3 million, or $0.24 per widespread share, significantly enhancing from an internet lack of $80.1 million within the an identical quarter ultimate yr. This net earnings comprised $0.3 million in net curiosity earnings and $4.3 million in entire payments.

Furthermore, Orchid recorded net realized and unrealized constructive elements of $21.2 million, or $0.29 per widespread share, from Residential Mortgage-Backed Securities (RMBS) and spinoff units, along with price of curiosity swaps.

Click on on proper right here to acquire our newest Constructive Analysis report on Orchid Island Capital, Inc. (ORC) (preview of net web page 1 of three confirmed beneath):

Overly Harmful Extreme Dividend Stock #1: Icahn Enterprises LP (IEP)

By way of its subsidiaries, Icahn Enterprises L.P. operates in funding, energy, automotive, meals packaging, metals, precise property and residential vogue corporations within the USA and Internationally.

The company’s Funding part focuses on discovering undervalued companies to allocate capital by way of its various private funding funds.

Very important positions embody FirstEnergy Firm (FE), Xerox Firm (XRX), Herc Holdings, Inc. (HRI), Newell Producers, Inc. (NWL), and Southwest Gas Holdings, Inc. (SWX).

On November eighth, 2024, the partnership halved its quarterly distribution to $0.50. This observe ultimate yr’s 50% reduce. On the an identical day, the partnership reported its Q3 outcomes for the interval ending September thirtieth, 2024.

For the quarter, revenues received right here in at $2.22 billion, 26% lower year-over-year, whereas the earnings per unit was $0.05 as compared with a antagonistic $0.01 in Q3-2023. Lower product sales have been ensuing from Icahn’s portfolio recording weaker outcomes as compared with ultimate yr.

Click on on proper right here to acquire our newest Constructive Analysis report on IEP (preview of net web page 1 of three confirmed beneath):

Final Concepts & Additional Learning

Extreme dividend shares are naturally attention-grabbing on the ground, ensuing from their extreme dividend yields.

Nevertheless earnings merchants need to guarantee they don’t fall proper right into a dividend ‘lure’, which suggests shopping for a stock solely ensuing from its extreme yield, solely to see the company reduce or take away the dividend payout.

Whereas there’s under no circumstances a guarantee a stock gained’t reduce its dividend, specializing in shares with sturdy underlying fundamentals and modest payout ratios can go a terrific distance.

In case you’re smitten by discovering high-quality dividend improvement shares and/or completely different high-yield securities and earnings securities, the subsequent Constructive Dividend belongings will doubtless be useful:

Extreme-Yield Explicit individual Security Evaluation

Totally different Constructive Dividend Sources