When it comes to dividends, any stock yielding more than 10% these days needs to be taken with a grain of salt. That’s because bigger isn’t usually better when you’re talking about dividend yields.
The FOMC has targeted short-term rates of between 1.75% to 2.00% in the U.S. and the yield on the benchmark 10-year note is hovering around 3%. Almost any other income investment can be priced based off these rates, depending on how much extra risk you’re willing to take on.
Historically-speaking, any time a stock is paying more than seven percentage points above the AAA-rated, government-secured debt, investors begin to worry if the dividend could be cut.…