I am not a fan of extremely generous dividend yields. More often than not, they are red flags that mark the presence of deep, dark financial problems.

That's the first thing I think of when I'm looking at regional telecom CenturyLink (NYSE:LUMN), bookstore chain Barnes & Noble (NYSE:BKS), and home-decor retailer Pier 1 Imports (OTC:PIRRQ). Their respective dividend yields stand at 10.3%, 8%, and 6.8% today -- and for all the wrong reasons.

One hand is holding three twenty-dollar bills while the other hand is setting the bills on fire with a lighter.

Image source: Getty Images.

This dividend isn't worth the paper it's written on

Bookseller Barnes & Noble's modern dividend history goes back to the summer of 2015, when the company started a nine-quarter string of payouts at $0.15 per share. However, the yield has increased from zero to 8% because of plunging share prices.

Selling traditional paperbacks and hardcovers in vintage bricks-and-mortar stores is such a quaintly outdated idea these days, where quick-shipping e-commerce options can scratch all the itches for physical books that the booming e-book industry didn't already take away.

Over the last three years, Barnes & Noble's sales have fallen 22%, while free cash flows took a 56% haircut. Shareholders reacted by taking the stock price 52% lower. That's one way to produce meaty dividend yields, but hardly the healthiest method in the book.

These days, the company is under pressure from activist investors to find a private-equity buyout exit somewhere. That's one way to stop the dividend from consuming 90% of Barnes & Noble's free cash flows, as they do today.

Whether Barnes & Noble finds a buyer or just turns off the dividend tap on its own, I simply don't see a future for these overly generous payouts.

This merger won't save CenturyLink's payouts

The last time CenturyLink increased its dividend payouts was way back in 2010, when the quarterly checks rose from $0.70 to $0.725 per share. That tiny boost disappeared three years later, as CenturyLink slashed the payouts all the way down to $0.54 per share. That's where the policy has been stuck ever since, but the company is piling up plenty of evidence that another dividend cut might be on its way.

This is what the company's sales and cash flow trends looked like over the last three years:

CTL Free Cash Flow (TTM) Chart

CTL Free Cash Flow (TTM) data by YCharts.

CenturyLink's annual dividend expenses add up to roughly $1.2 billion. That's a problem when you're generating just $422 million of free cash flows over the same period.

The pending merger with Level 3 Communications (NYSE:LVLT) is expected to boost CenturyLink's weak cash flows and perhaps save the dividend for a while. Management said as much when the deal was announced, promising to keep the annual payout at $2.16 per share at least for a while.

However, the Level 3 merger is structured as a cash-plus-stock deal that will require the printing of more than 500 million new CenturyLink shares. So the combined company's free cash flows may jump, but the total dividend expenses will nearly double.

Too many red flags and blaring sirens for my taste. I'm staying far away from CenturyLink and its ramshackle dividend promises.

How is this company still in business?

Finally, I've had Pier 1 Imports on my watch list of dying businesses for nearly a decade now. Somehow, the company keeps finding ways to survive. Somehow, management thought it might be a good idea to start paying dividends five years ago. In all fairness, Pier 1 only spends a third of its free cash flows on dividend checks, and the payouts increased twice in the first two years of the new policy.

Still, I'm not at all sure that Pier 1 has any business sending out dividend checks.

The company recently reported first-quarter results, missing analyst targets across the board and lowering its full-year revenue guidance by a hair. The report inspired analyst firm Deutsche Bank to lower its price targets on an already sell-rated stock, noting that the company "has lost its competitive advantage."

I'm just wondering what that competitive advantage might have been in the first place. Pier 1 should use its dividend budget to bolster its shaky business operations instead. The company could use a solid e-commerce strategy or a brand new marketing approach. Until then, Pier 1's business trends look as grim as ever:

PIR Revenue (TTM) Chart

PIR Revenue (TTM) data by YCharts.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.