Long-term investors love stocks with high dividends. And, just because a dividend is high doesn't necessarily mean it's risky or it can't be sustained over the long term.
For example, ARMOUR residential REIT (ARR 4.14%) pays a dividend of nearly 14% and there is no reason to believe the company won't be able to continue paying it. I'll discuss why this is the case shortly.
However, a higher dividend yield definitely warrants a little extra homework on your part before buying the stock. There are a few "red flags" to look for that can tell you whether a high dividend is unsustainable, so let's take a look at what you should be on the lookout for, and why the dividends of Western Asset Mortgage Capital Corp (WMC 1.24%), Resource Capital Corp (ACR), and Windstream Holdings (WINMQ) are not to be trusted.