Navigating the world of high yield dividend stocks can be difficult. While those high yields reduce overall investor risk when share prices go down, they also require significant capital for their continued payment. Generally speaking, the higher a dividend yield, the greater the overall risk. Dividend yields in the 2% to 6% range are considered ideal. Dividends yielding more than 6% are generally considered at risk.

And while dividend yields are one way of measuring risk, there are plenty of others. Payout ratio is one which is particularly useful. It measures the amount of profits a company pays out as dividends. Ratios between 35% to 55% are considered healthy. 

Each of the at-risk dividend stocks discussed below deviates from one or both of those healthy ranges. So, as appealing as they may be to income investors seeking dividend cash, they’re probably too risky because either their share price, dividend or both are at risk of falling further. 

Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance (NYSE:WBA) is a well-known pharmaceutical retailer with a stock that is headed in the wrong direction. In fact, WBA shares have fallen from $26 to below $16 in 2024.

I think Walgreens Boots Alliance is primarily at risk of further share price deterioration due to recent dividend reductions. Walgreens Boots Alliance had long been a member of the Dividend Aristocrats — companies that have increased their dividend for 25 consecutive years — but reduced its dividend in January, shocking investors. Prior to that, the company last reduced its dividend in 1976.

That is troublesome enough but the other problem with Walgreens Boots Alliance and the reason investors should avoid it entirely has to do with its lack of competitiveness. The company simply does not derive high margins from its sales. It isn’t competitive relative to others within its industry.

Forbes recently compared Walgreens to CVS (NYSE:CVS) and found CVS outperforms it on a number of important metrics. Surprisingly, Forbes also suggested it expects WBA to outperform CVS in the future solely because it is relatively underpriced compared to its rival. That logic is entirely backward. WBA shares are cheaper than those from CVS precisely because it underperforms, not because it’s been unfairly maligned. 

Service Properties Trust (SVC)

Service Properties Trust (NASDAQ:SVC) stock represents a real estate investment trust (REIT) focused on hotels and service-related properties. The company continues on a long-term decline, which will affect its dividend again at some point or another.

The most dramatic decline for the stock occurred in 2020 at the onset of the pandemic. Revenues declined by more than 45% that year sending shares tumbling from $22 to $5. However, the stock had been trending downward for the previous five years as well. So, it’s not as if Service Properties Trust simply was a victim of the pandemic.

The global health crisis prompted a dividend reduction in 2021. The company has not been able to regain net overall profitability since the pandemic. While the company continues to pay dividends, the funds from operations (FFO) from which dividends are paid, declined by 43% in the most recent quarter. Normalized FFO was $0.13 per share in Q1 but distributions amounted to $0.20 per share. That is unsustainable.

AGNC Investment (AGNC)

AGNC Investment (NASDAQ:AGNC) is another REIT stock that investors should be wary of. The firm provides capital for mortgage-backed securities (MBS) guaranteed by the U.S. government. That’s the same investment vehicle that proved so disastrous not so many years ago.

There are legitimate reasons to believe that AGNC stock will punish shareholders again. Previously I mentioned the payout ratio is an excellent predictor of the overall health of a given dividend. However, it isn’t particularly applicable to REITs. So, AGNC Investment’s payout ratio of 1.58 doesn’t mean the company is necessarily unhealthy. 

For REITs we must instead look at funds from operations (FFO) as a predictor of dividend stability. That’s where the problem emerges. The company’s FFO is all over the place. One quarter it’s positive, the next it’s negative.

It’s fine to be wary of AGNC Investment because of the history of mortgage-backed securities. If that isn’t enough to scare you away, simply look at the unpredictable FFO from the company.

Kohl’s (KSS)

Kohl’s (NYSE:KSS) stock is probably best avoided. The well-known department store retailer operates in a sensitive consumer discretionary sector and has not been doing well for several years.

A cursory view of Kohl’s performance hisotry should give investors a few strong clues as to why it’s to be avoided, especially for income investors. The stock’s dividend yield is near 9% at the moment which is generally considered to be unhealthy. Its payout ratio is also above the healthy range, at 0.81. 

That means 81% of earnings are directed toward paying dividends. That is simply too high and especially so given the poor operational performance of Kohl’s overall. The company could certainly redirect those earnings toward improvements otherwise. 

Here’s what’s really strange about Kohl’s: The company’s best year of late came in 2021 when revenues grew by more than 20%. That was the only year of the past five in which Kohl’s showed overall revenue growth. However, the company also reduced its dividend in 2021. There’s simply too much variance in Kohl’s operations.

Ardagh Metal Packaging (AMBP) 

Ardagh Metal Packaging (NYSE:AMBP) makes metal beverage cans used for beer, soft drinks, and all other beverages. The stock also provides a dividend yielding more than 10%, making it attractive to income investors. 

The dividend has yielded more than 15% at times within the last few years. That level of yield will certainly entice some investors. However, Ardagh Metal Packaging also reduced its dividend in 2022, suggesting it isn’t dependable overall.

The primary reason is Ardagh’s debt. The can maker doesn’t have enough capital to cover its interest, which is highly concerning. That is leading the company into a vicious cycle by which it issues additional debt in order to make up the difference. 

High-risk-seeking investors might enjoy the roller coaster ride the stock will offer. Those who can sit back and collect a 10% return from dividends alone could certainly make out well. However, the company’s poor operations mean it’s likely to reduce that dividend again at some point. Once it does, there’s no reason to be invested in Ardagh Metal Packaging. 

Brandywine Realty Trust (BDN)

Brandywine Realty Trust (NYSE:BDN) is an office REIT stock, which will automatically raise warning alarms for many investors. Urbanization trends partially due to other trends such as remote work have introduced substantial risk to office REIT stocks. 

Revenue growth was under 2% throughout 2023. Overall though, it was positive, marking the second consecutive year of revenue growth for the company. Prior to that, Brandywine Realty Trust had seen its revenues decline in each of the previous two years.

Despite modest revenue growth, the company reported a net loss in excess of $197 million in 2023. Net income is particularly concerning and is highly variable. To put a fine point on the stock, it’s very difficult to find a rational business case for investing in Brandywine Realty Trust. Yes, the dividend currently offers a forward yield of 13.23% but it was reduced in 2023. The payout’s continued payment is hardly a foregone conclusion. 

For now, Brandywine Realty Trust’s FFO continues to cover its dividend payouts. However, the combination of net losses that tripled in Q1, declining overall funds from operations and overarching concerns related to office REITs makes BDN too risky. The 13.2% dividend looks like a siren song to me.

B&G Foods (BGS)

B&G Foods (NYSE:BGS) is a packaged food manufacturer with a stock offering a dividend yielding 8.1% at the moment.

There are several indications that the dividend is unsustainable. For one, it was recently reduced in 2023. It’s also been shrinking over the past five years at an annual rate of more than 13%. If those two factors weren’t enough to dissuade some investors, its payout ratio should be. That ratio sits at 0.84, meaning 84% of earnings are directed toward dividend payments. 

If the company’s overall business were improving then perhaps it would be logical to try to find a silver lining. However, B&G Foods has real problems that show up on the income statement under other operating expenses. These costs have ballooned over the past two fiscal years.

B&G doesn’t break them out in detail so it’s difficult to know exactly what is going on. However, the net effect is the company has been losing money over the past two years, whereas it hadn’t been prior. That puts the dividend at further risk in the future. 

On the date of publication, Alex Sirois did not have (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.