{"id":4680,"date":"2026-10-20T11:07:28","date_gmt":"2026-10-20T11:07:28","guid":{"rendered":"https:\/\/smartinvestingschronicle.com\/index.php\/2026\/10\/20\/a-high-dividend-yield-can-be-a-warning-sign-heres-why\/"},"modified":"2026-10-20T11:07:28","modified_gmt":"2026-10-20T11:07:28","slug":"a-high-dividend-yield-can-be-a-warning-sign-heres-why","status":"publish","type":"post","link":"https:\/\/smartinvestingschronicle.com\/index.php\/2026\/10\/20\/a-high-dividend-yield-can-be-a-warning-sign-heres-why\/","title":{"rendered":"A High Dividend Yield Can Be a Warning Sign: Here’s Why"},"content":{"rendered":"
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One of the first things that investors get drawn to when looking at a dividend stock is a high dividend yield. At first glance, that makes sense. It makes an income goal much easier to reach. If a $10,000 investment is pulling in $1,000 thanks to a 10% yield, that is more appealing than the 3% dividend, right?<\/p>\n

The thing is that a 10% yield can be hiding a lot. You can\u2019t assume that dividend payment will continue forever.<\/p>\n

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Source: Getty Images<\/p>\n<\/figcaption><\/figure>\n

What a high dividend yield tells you<\/strong><\/h2>\n

Let\u2019s start with what the yield actually is. The yield is the annual dividend per share divided by the share price. What this means is that a yield can rise without the company increasing its payment.<\/p>\n

By way of example, consider a stock that pays $1 annually. At $20 per share, that\u2019s a 5% yield. If the share price suddenly falls to $10 and the dividend stays the same, the yield suddenly doubles to 10%.<\/p>\n

In this example, you might be collecting more for each dollar invested, but it doesn\u2019t tell you what caused that decline or whether the payout is sustainable.<\/p>\n

There are a few recent examples on the market for investors to take note of.<\/p>\n

Slate Grocery REIT shows that distributions can stop<\/strong><\/h2>\n

The first stock that offered a high dividend yield is Slate Grocery REIT<\/strong> (TSX: SGR.UN). Slate is one of the better-known REITs in Canada. The company owns a portfolio of over 100 U.S. grocery-anchored shopping centres.<\/p>\n

These properties have obvious appeal. People need to buy groceries, and those regular visits provide a traffic bump to adjacent retailers also on the property.<\/p>\n

The problem here is that a consistent shopping habit doesn\u2019t guarantee a dependable distribution.<\/p>\n

In the most recent quarter, Slate\u2019s AFFO payout ratio reached 113.1%. This means that the amount that Slate was paying out exceeded the adjusted funds from operations the company was taking in.<\/p>\n

Last month, Slate announced that it was suspending monthly distributions to preserve financial and strategic flexibility during its strategic review.<\/p>\n

Then a few days later, Slate announced it was being acquired by Brixmor <\/strong>(NYSE: BRX) and Everview Partners for US$13 per unit in cash. The agreement also called for no more distributions to be paid until closing, which isn\u2019t expected until early 2027.<\/p>\n

Slate\u2019s yield was attractive, but investors who counted on those monthly payments now need another source of income.<\/p>\n

TELUS shows how an income stream can shrink<\/strong><\/h2>\n

TELUS<\/strong> (TSX: T) is one of Canada\u2019s big telecom stocks and it offers a different lesson for dividend investors.<\/p>\n

Canada\u2019s telecoms have faced pressure in recent years as higher financing costs have squeezed free cash flow.<\/p>\n

And this past July, Telus announced it was cutting its dividend by 55%, bringing the payout down from $0.42 to $0.19 per share. The company stated that the reduction would help to route nearly $2.7 billion toward debt reduction through 2028. \u00a0<\/p>\n

That announcement followed another one several months earlier when Telus announced it was pausing its dividend increases.<\/p>\n

As at the time of writing, Telus now yields 6.3%. That\u2019s still attractive enough to catch an income investor\u2019s attention, and the smaller payout leaves Telus more breathing room.<\/p>\n

But for existing investors, that cut represents a huge decrease in income. Someone holding 1,000 shares saw their annual income fall from over $1,600 to just $750.<\/p>\n

Look beyond the yield before buying<\/strong><\/h2>\n

For prospective investors, the real takeaway is to look before buying a high dividend yield stock. If the company can support the payout by generating enough cash, that\u2019s great. If it can\u2019t, that\u2019s a warning sign.<\/p>\n

A stock with a high dividend yield can be part of a portfolio. Just do your research.<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

One of the first things that investors get drawn to when looking at a dividend stock is a high dividend yield. At first glance, that makes sense. It makes an income goal much easier to reach. If a $10,000 investment is pulling in $1,000 thanks to a 10% yield, that is more appealing than the […]<\/p>\n","protected":false},"author":1,"featured_media":4681,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-4680","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/posts\/4680","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/comments?post=4680"}],"version-history":[{"count":0,"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/posts\/4680\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/media\/4681"}],"wp:attachment":[{"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/media?parent=4680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/categories?post=4680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/smartinvestingschronicle.com\/index.php\/wp-json\/wp\/v2\/tags?post=4680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}