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You need to be extra careful with high-dividend stocks. Here are some that might not be able to afford to keep up their high payouts.
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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 +0.00%) 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 +0.00%), Resource Capital Corp (RSO +0.00%), and Windstream Holdings (WIN +0.00%) are not to be trusted.