In today’s low-interest-rate world, dividends of more than 5% are often treated with extreme skepticism.
Most of the time, investors are onto something. But if the market has
beaten up a stock to the point where the yield looks pretty enticing,
there’s something wrong. Sometimes this problem is fixable and
represents a good buying opportunity. Other times, it’s the beginning of
something much more dire, which eventually leads to Armageddon for
dividend-growth investors. Yes, I’m talking about the dreaded dividend
cut.
Among the struggling high yielders, there are often great
opportunities. Sure, they’re few and far between, but they’re worth
looking for. Finding the right opportunity gives an investor the chance
to get a capital gain that beats the market, while collecting an
oversized dividend. That’s the kind of combination I can really get
behind. (more)
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