/biz/ - Business & Finance

Lastly, you can view the div yield % as basically the ratio of dividend returns compared to the price of entry (share price at current market price). If a company has a ridiculous high div %, then something could be wrong, as the share price is mega low but they're still paying out massive dividends to holders (which isn't sustainable in the long term if the company is actually doing bad, they'll need that div cash). This could lead to slashing div paybacks or just getting rid of them completely to save money for the company.

I think rule of thumb is to be cautious when div yield is above like 4-5%, really look into the company and if its in trouble or not. (Div fren can probably provide insight on this)

For a recent example, take a look at GME (Gamestop). They're holding their dividend even though their ERs are getting pretty rough, just look at the chart. The company can't keep paying it forever. And for another example, take a look at GE (General Electric): they had multiple dividend slashes to save money for the company in trouble. GE was a nice meaty div payer for boomers for the loooongest time and an essential part of many retirement funds as a div payer. The moment the share price started tanking and the div cuts came in, people jumped the fuck out of it, wasn't reliable as a div payer for boomers any more.