Everyone loves a bargain. It’s why Boxing Day sales are such a riot, or why my car salesman father tries to haggle nearly everything he buys. But as in life, sometimes a deal (or yield in this case) is too good to be true.
Dividend traps occur when investors (like you, my dear reader), are lured in by a high dividend yield before realising the underlying company isn’t all it is cracked up to be. Particularly now with inflation running so hot, it’s easy to see why alluringly high yields would catch an investor’s eye.
However, if a company’s share price continues to plummet, or it turns out the company can’t pay the dividend it promised – that seductive dividend yield will turn into a trap.
In this episode, Livewire’s Ally Selby is joined by Wheelhouse Partners’ Alastair MacLeod and Plato Investment Management’s Dr Don Hamson for their analysis of three stocks with sky-high yields that could just be dividend traps.
And for a little bit of positivity, we also asked our fundies to each name one stock with a dividend yield you can actually trust.
Now, that’s what I call value for money.