Warning: Top 10 High Dividend Stocks That Could Sink Your Portfolio!

Are you an income investor searching for high dividend stocks to add to your portfolio? While a high dividend yield can be attractive, it’s essential to tread carefully to avoid falling into a dividend ‘trap.’ Investing solely based on dividend yield could lead to losses if a company cuts or eliminates its dividend payout. To help you navigate the risky waters of high dividend stocks, we’ve compiled a list of 10 of the most hazardous high dividend stocks. These stocks have dividend yields above 10%, but lack the fundamental strength needed to sustain their payouts over the long term. Let’s take a closer look at these risky investments:

1. Icahn Enterprises LP (IEP)
   • Operates in investment, energy, automotive, food packaging, metals, real estate, and home fashion businesses.
   • Subsidiaries focus on finding undervalued companies for capital allocation.
   • Recently halved its quarterly distribution to $0.50 due to weaker results compared to the previous year.
2. Orchid Island Capital (ORC)
   • Managed by Bimini Advisors LLC and invests in residential mortgage-backed securities.
   • Reported a significant improvement in net income from the same quarter last year.
   • Recorded net realized and unrealized gains from RMBS.
3. Kohl’s Corporation (KSS)
   • Offers women’s, men’s, and children’s apparel, housewares, and accessories across 1,100 stores.
   • Earnings growth driven by extensive share repurchase program.
   • Weakening demand, margin headwinds, and lower sales forecasted for the coming year.
4. ARMOUR Residential REIT (ARR)
   • Invests in residential mortgage-backed securities including GSE and Ginnie Mae.
   • Reported a GAAP net income available to common stockholders with a net interest income.
   • Raised capital through an at-the-market program and paid Q3 dividends.
5. B&G Foods, Inc. (BGS)
   • Consumer staples company with 50+ brands in various food categories.
   • Recorded a decrease in net sales with adjusted net income for the third quarter.
   • Lowered 2024 revenue guidance due to weaker results in the third quarter.
6. New York Mortgage Trust (NYMT)
   • Manages a portfolio of real estate-related investments including residential mortgages.
   • Reported third-quarter results ahead of expectations but still weak.
   • Purchased Agency RMBS and residential loans during the quarter.
7. Prospect Capital (PSEC)
   • Provides private debt and equity to middle-market companies.
   • Significantly reduced its dividend payout by 25% in the first quarter.
   • Emphasizing first lien senior secured lending in its new strategy.
8. Arbor Realty Trust (ABR)
   • Nationwide mortgage REIT with a focus on government-sponsored enterprise products.
   • Reported third-quarter results with net income and distributable earnings per share.
   • Declared a cash dividend per share and announced substantial loan originations.
9. Xerox Corporation (XRX)
   • Specializes in document management systems after spinning off its business processing unit.
   • Reported dismal third-quarter earnings with revenue and adjusted EPS missing estimates.
   • Included non-cash after-tax goodwill impairment charges in unadjusted earnings.
10. PennantPark Floating Rate Capital (PFLT)
    • Business development company that makes secondary direct investments in middle-market companies.
    • Reported strong results for the fourth fiscal quarter with core net investment income.
    • Continued to invest in new and existing companies post-quarter.

While these high dividend stocks may seem appealing at first glance, it’s crucial for income investors to consider the risks involved. Ensure that you thoroughly evaluate each investment opportunity, focusing on fundamental strength and modest payout ratios to guard against potential dividend cuts. Don’t let a high yield blind you to the underlying risks. Happy investing!