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 0.40% ) 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 -0.88% ), Resource Capital Corp ( ACR -2.09% ), and Windstream Holdings ( WINMQ ) are not to be trusted.