Operating under the mantra of ‘more is better,’ some income-focused investors seek out the highest-yielding dividend stocks out there. Yet if you think that a super-high yield may in theory sound like an easy path to high returns, it may be best to keep in mind the old adage, “there’s no such thing as a free lunch.”

As it pertains to dividend stocks, this means that it’s impossible to build a portfolio of high-yielders without assuming a higher level of risk. There’s a reason why the market has priced certain stocks in such a way that they offer yields of 10%, 15%, 20%, or even higher.

Stocks in this category are typically experiencing headwinds/uncertainties that leave them at risk of either having to slash/suspend their payouts, or experience sharp declines in price that outweigh the above-average payouts.

That said, while you may want to tread carefully with six of the seven highest-yielding dividend stocks discussed below, there is one that may just well be worthy of a buy.

Armour Residential REIT (ARR)

Armour Residential REIT (NYSE:ARR) is a mortgage real estate investment trust (or mREIT). Instead of buying/holding real property, Armour instead invests in mortgage backed securities.

Shareholders in this mREIT receive a 40 cent per share cash dividend each month. This gives ARR stock an effective forward dividend yield of 29.34% at current prices.

However, don’t assume that you’ll be able to buy ARR today, collect the dividends, and book a nearly 30% gain on your investment over the next twelve months.

Surging interest rates have put the squeeze on Armour’s distributable net income. As a Seeking Alpha commentator pointed out last month, a considerable “dividend reset” is likely in 2024. High rates are also reducing the value of ARR’s portfolio.

Although the stock’s nearly 36% slide over the past six months may help to account for this, further price declines may occur if high rates persist.

Diana Shipping (DSX)

With a forward dividend yield of 19.61%, Diana Shipping (NYSE:DSX) is one of the highest-yielding dividend stocks available to stateside investors. Yet while this Greek-based shipping company has been making big payouts to shareholders since 2022, it’s unclear whether this will continue in 2024.

Following the end of the post-pandemic boom in shipping, revenue and earnings for Diana have been dropping in recent quarters. Based upon one of the company’s recent charter extension deals, this trend appears set to continue.

This points to the high payouts, which have already received a haircut, declining further from here. This will probably apply more pressure to DSX stock, which is down 22.7% year-to-date.

While I wouldn’t conclude that Diana Shipping is a “sinking ship,” at the same time I wouldn’t be tempted by the stock’s for-now high yield. The best course of action here is to steer clear.

Icahn Enterprises (IEP)

Icahn Enterprises (NASDAQ:IEP) is billionaire activist investor Carl Icahn’s publicly traded investment vehicle. Besides being appealing to investors to invest alongside a legend, shares in this master limited partnership were also appealing because of their high distribution yield.

However, this changed back in May, following the release of a “short report” on IEP stock issued by Hindenburg Research. Calling into question the sustainability of future payouts, Hindenburg’s report elicited a highly negative reaction from investors. Within weeks, IEP stock dropped from around $50 to around $20 per share.

Even after a 50% cut in its quarterly distributions (from $2 to $1 per share) IEP still sports a very high dividend yield (20.47%). Yet with great uncertainty whether further cuts are coming, and the fact IEP trades for nearly twice its book value, it’s too early to say that the dust has truly settled.

Invesco Mortgage Capital (IVR)

Invesco Mortgage Capital (NYSE:IVR) is another of the mREITs that is currently one of highest-yielding dividend stocks. Based on its current rate of payout, IVR has a forward dividend yield of 21.16%. Yet with this very high rate of payout, comes with it a big caveat.

IVR not only invests in residential mortgage-backed securities, but commercial mortgage-backed securities as well. This higher exposure to commercial real estate has been a big negative for IVR stock since the Covid-19 pandemic.

Since 2020, this mREIT has gone from paying out a $5 per share quarterly dividend to a 40 cent per share quarterly dividend.

IVR’s stock price has also collapsed from over $175 per share, to just $7.59 per share today. As unfavorable interest rate trends persist, and as the commercial real estate crisis persists as well, more losses may lie ahead for IVR.

Office Properties Income Trust (OPI)

Office Properties Income Trust (NASDAQ:OPI) owns a portfolio of office and mixed-use real estate properties.

Another stock hit hard by the challenging environment for commercial real estate, to some there may be a silver lining: OPI’s still-high dividend.

With OPI stock declining faster than reductions to its dividend payouts, shares today sport a very high yield (20.75%). However, with the market pricing the stock in a such a manner, it’s clear that there’s great uncertainty as to whether this current payout rate will hold.

Even if OPI’s now-reduced dividend rate avoids further reductions, sell-side analysts expect OPI’s revenue and funds from operations, or FFO (the REIT equivalent to earnings), to decline further in 2024. A further deterioration of its real estate portfolio would mean another drop in the REIT’s underlying value. In turn, causing shares to depreciate at a rate that exceeds the aforementioned double-digit dividend.

Orchid Island Capital (ORC)

Orchid Island Capital (NYSE:ORC) is the third mREIT on this list of the highest-yielding dividend stocks. Like with ARR and IVR, ORC’s dividend yield is north of 20% (20.87%, to be exact).

Unsurprisingly, just like with the two other high-yield mREITs, dividend cut risk runs extremely high with this name as well.

Falling net interest margins and loan losses have decimated Orchid Island’s profitability. While ORC stock raised its monthly cash dividend from 4.5 cents to 16 cents not too long after I declared it a “yield trap” back in June 2022, the monthly payout has since fallen back to 12 cents per share.

Not only that, while ORC’s yield has technically increased compared to mid-2022, during this time frame, the stock has fallen by more than 50%, well in excess of the 20%-plus payout. As shares and/or the dividend could fall again, avoid.

Torm plc (TRMD)

Among these highest-yielding stocks, Torm plc (NASDAQ:TRMD) appears to be the one most worthy of making a buy.

This U.K.-based midstream oil company, specializing in the transport of petroleum products by sea, has benefited from favorable trends in the oil tanker industry.

Strong results have resulted in high dividends for TRMD stock investors. At the current rate of payout, shares sport a forward yield of around 22.49%. Although there are concerns that favorable trends may only be temporary, for now they continue. At least, based on Torm’s latest fiscal results.

Reporting another quarter of strong free cash flow, Torm appears well-positioned to maintain its payouts for now. Not only that, with the tanker owner expanding its fleet, Torm is still expanding its business, while at the same time rewarding shareholders with high dividends. While risky, consider adding high-yielder TRMD to your watchlist.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.