Carl Icahn ranks as one of the most famous activist investors in the world -- and one of the most successful. His net worth currently totals close to $5.8 billion.

Although Icahn has money in dozens of stocks, his top position, by far, is in his own Icahn Enterprises LP (IEP -0.12%). He owns nearly 86% of the holding company, which generates close to two-thirds of its revenue from investments and energy.

Two things especially stand out about Icahn Enterprises right now. First, it offers a mind-boggling dividend yield of 22%. Second, Wall Street thinks the stock will skyrocket 45% over the next 12 months.

What's behind Icahn Enterprises' sky-high yield?

You won't find many stocks with dividend yields of 22%. What's behind Icahn Enterprises' sky-high yield?

The limited partnership has consistently paid distributions of $1 per unit each quarter. These distributions are funded, in part, from dividends and distributions that Icahn Enterprises receives from its subsidiaries, including CVR Energy.

While the distribution payouts have remained steady, Icahn Enterprises' share price hasn't. Over the last 12 months, the stock has plunged more than 65%. The company's yield was already high before this decline but moved even higher the more the stock fell.

This dismal stock performance is due largely to IEP's short-selling. Carl Icahn acknowledged to unitholders in a letter written in August 2023 that the company had "strayed over the past several years from our activist methodology and shorted (hedged) far more than was necessary." He added, "While we made money on the long side through our activism efforts, our returns have been overwhelmed by our overly bearish view of the market and related oversized short (hedge) positions."

Short-selling also hurt the company in another way. Hindenberg Research published a report in May alleging that Icahn Enterprises' net asset value was inflated and the holding company wasn't generating enough cash flow to support its distributions.

Unsurprisingly, Hindenberg Research also revealed that it had shorted the company's stock. This report caused a major sell-off after its release.

Why does Wall Street think the stock will skyrocket?

The average analyst's 12-month price target for the company is $26, according to LSEG. That's 45% above the stock's current price. Why does Wall Street think it will skyrocket?

It's important to first note that the "average" provided by LSEG includes only one analyst's estimate. I assume this lone analyst is Jefferies. However, the last update from Jefferies of which I'm aware came on Aug. 7, 2023, when the investment firm maintained its buy rating with a price target of $27. This target reflects an upside potential of 53%, based on the current share price.

Jefferies analyst Daniel Fannon has been a longtime bull on Icahn Enterprises. He likes that the holding company gives retail investors a way to jump aboard the activist investor bandwagon.

Hindenberg Research, though, accused Jefferies of "one of the worst cases of sell-side research malpractice we've seen" by blindly assuming that the company's distribution is sustainable forever. The short-seller also noted that Jefferies has handled all of Icahn Enterprises' at-the-market offerings since 2019.

However, Jefferies could be taking to heart Carl Icahn's commitment to unitholders that his holding company will "stick to our knitting and focus on our activist strategy while remaining appropriately hedged." That's a strategy that has worked well for IEP over the long run.

Is Icahn Enterprises stock a buy?

I don't have any confidence in "perma-bull" recommendations for Icahn Enterprises. It would surprise me if the stock skyrockets 45% or higher in 2024. I also don't have a warm and fuzzy feeling that the company's distribution will remain at current levels.

That said, a return to the company's activist strategies of the past could improve its financial performance over the next few years. Even if a distribution cut is on the way, I suspect that Icahn Enterprises' yield would still be very high.

My biggest qualm with Icahn Enterprises, though, is that there are other stocks that offer more attractive risk-reward propositions. I think that investors will be better off looking elsewhere.