Savvy investors are always on the lookout for companies that have a long history of paying out high-yield dividends. But that also means being careful not to get caught in the trap in which an inviting yield results from a falling share price and worse, a failing business model.
Perhaps the best example is Pitney Bowes (NYSE:PBI), known for historical dividend increases and dividend-paying stability. If you were to screen the company today for its dividend yield, you’d be pleased to see a 12%-plus number next to its name.
Look a little bit deeper, however, and you’ll find PBI’s dividend may not be stable at all. Indeed, a share price that has tumbled nearly 70% over the past five years is the primary reason the yield is so high. In five more years, PBI may not even be around anymore.
The lesson is clear: Don’t look at dividend yields alone — make sure you understand the company’s fundamentals and business model before you leap. Here are four examples that span the spectrum for high-dividend-yield stocks and whether they get a green, yellow or red light.