Make your money go further for just 25p per day

PREMIUM

Dividend dogs vs diamonds: Part 1 – beware the yield

21/05/2019 · Barratt Developments (BDEV)  · Bovis Homes Group (BVS)  · BT (BT.A)  · Centrica (CNA)  · Direct Line Insurance Group (DLG)  · Evraz (EVR)  · Imperial Tobacco (IMB)  · Persimmon (PSN)  · SSE (SSE)  · Vodafone (VOD) 

Dividends FTSE 100 UK

Centrica-owned British Gas van

A high yielding dividend might be very tempting to investors seeking a little extra income, but buying a stock for a yield which is unsustainable is a worryingly easy way to lose money. Vodafone is proof of that. In part one of our mini-series on income investing, we pick out the companies which look like they might be the next victims of a dividend cut.


An 8% dividend yield is a major red flag for income investors. It is shareholders’ polite way of telling company management and analysts that they do not have faith in their forecasts for both profits and the pay-out.

More often than not, they are right. Russ Mould, investment director at AJ Bell, said: “It's not perfect but the market often does a pretty good job of factoring in news ahead of time”. That is certainly true of Vodafone (LON: VOD), who’s shares were yielding over 10% when management cut the annual pay-out by 40% in May, putting an end to more…

Continue reading this article…

Gain access to all our excellent content for just £90 per year, that’s just 25p per day for financial freedom.
  • In depth coverage of many of the world’s great companies
  • Breaking news on potential upcoming disasters
  • Unique insights from our top research team
Get access to our premium content for as little as £3.20 per article.
  • Only pay for what you want to read
  • Easy credit payment system
  • Access our excellent Premium content

Previous article Next article

Have your say

Log in or register to view or add comments.

For access to the top news and insights from the investment world

REGISTER FREE TODAY

Become a Champion Investor for as little as £3.20 per report or get a year's worth of money-making analysis for just £90.

START FREE TRIAL

More on Barratt Developments

What does the Tory landslide mean for your investments?

20/11/2019 · News & Insights

We have run through the major policies which might impact your investment and picked out six…


The week at a glance: 30 August – prorogue

30/08/2019 · News & Insights

Britain was always going to have a messy Autumn. This week’s prorogue drama has given a…


More on Bovis Homes Group

How are the housebuilders coping with the UK property market?

11/07/2019 · Companies Analysed

The share prices of many of the UK’s major housebuilders suggest that investors are wary about…


Dividend dogs vs diamonds: Part 1 – beware the yield

21/05/2019 · Companies Analysed

A high yielding dividend might be very tempting to investors seeking a little extra income, but…


More on BT

Amazon’s world takeover moves to football

04/12/2019 · News & Insights

Amazon’s coverage of the Premier League is a win for consumers. But what does the US…


Will Labour kill the UK’s pharma industry?

26/11/2019 · News & Insights

Are businesses and investors right to fear a Labour government? Will our portfolios be hurt if…


More on Centrica

FTSE shuffle: September promotions and demotions

29/08/2019 · News & Insights

In the first week of September, the FTSE 100 will be shuffled to reflect new market…


The week at a glance: 29 July – dividend disasters

02/08/2019 · News & Insights

There have been some big dividend cuts in the UK this week as companies battle to…


More on Direct Line Insurance Group

Our income portfolio is delivering market-beating dividend growth

18/09/2019 · Portfolio

Nine months after launching our Income Boosters portfolio, it's time to take a fresh look. Over…


Dividend dogs vs diamonds: Part 1 – beware the yield

21/05/2019 · Companies Analysed

A high yielding dividend might be very tempting to investors seeking a little extra income, but…


More on Evraz

Dividend dogs vs diamonds: Part 1 – beware the yield

21/05/2019 · Companies Analysed

A high yielding dividend might be very tempting to investors seeking a little extra income, but…


Good governance: five steps to investment success

16/04/2019 · Companies Analysed

Weak corporate governance can have a major impact on shareholder returns and is therefore seen as…


More on Imperial Tobacco

Weekend round-up: Six big business stories you don’t want to miss

04/10/2019 · News & Insights

Stock markets shattered on Wednesday, welcoming a woeful start to Q4 which feels worryingly familiar. Here…


Weekly round-up: Hong Kong calling

13/09/2019 · News & Insights

Here is our run-through of some of the biggest business stories of the week, in which…


More on Persimmon

European expansion boosts IHT qualifying Michelmersh

03/09/2019 · Companies Analysed

Established in 1997, Michelmersh Brick Holdings (LON:MBH) comprises six of the UK’s premium brands of…


The week at a glance: 30 August – prorogue

30/08/2019 · News & Insights

Britain was always going to have a messy Autumn. This week’s prorogue drama has given a…


More on SSE

How to invest in renewable energy and make a profit

01/11/2019 · Companies Analysed

In 2020, an estimated £8.4bn is expected to be spent on renewable energy projects in the…


Dividend dogs vs diamonds: Part 1 – beware the yield

21/05/2019 · Companies Analysed

A high yielding dividend might be very tempting to investors seeking a little extra income, but…


More on Vodafone

Business breakdown: 5 stories to make you money

07/11/2019 · News & Insights

US earnings season is coming to an end, just as election season in the UK is…


The week at a glance: 22 July – results madness

26/07/2019 · News & Insights

Who says 38-degree heat isn’t the perfect temperature for analysing company results? For those who didn’t…


More Companies Analysed

A rare transport company for any political climate

10/12/2019 · Go-Ahead Group

Is Boohoo on the verge of an Asos-style collapse?

27/11/2019 · ASOS · boohoo.com plc

Is Brand Architekts really as cheap as it seems?

20/11/2019 · Brands Architekts

More on Barratt Developments

What does the Tory landslide mean for your investments?

The week at a glance: 30 August – prorogue

How are the housebuilders coping with the UK property market?

Dividend dogs vs diamonds: Part 1 – beware the yield

More on Bovis Homes Group

How are the housebuilders coping with the UK property market?

Dividend dogs vs diamonds: Part 1 – beware the yield

Help to Buy: has it worked?

UK Housebuilders: bargain or value trap?

More on BT

Amazon’s world takeover moves to football

Will Labour kill the UK’s pharma industry?

Business breakdown: what do this week’s top stories mean for your money?

What does the Tory landslide mean for your investments?

More on Centrica

FTSE shuffle: September promotions and demotions

The week at a glance: 29 July – dividend disasters

Dividend dogs vs diamonds: Part 1 – beware the yield

More on Direct Line Insurance Group

Our income portfolio is delivering market-beating dividend growth

Dividend dogs vs diamonds: Part 1 – beware the yield

Batten down the hatches – it’s time to get defensive

Direct Line dividends should reward shareholder loyalty

More on Evraz

Dividend dogs vs diamonds: Part 1 – beware the yield

Good governance: five steps to investment success

More on Imperial Tobacco

Weekend round-up: Six big business stories you don’t want to miss

Weekly round-up: Hong Kong calling

Dividend dogs vs diamonds: Part 1 – beware the yield

Measuring the markets: when not to panic

More on Persimmon

European expansion boosts IHT qualifying Michelmersh

The week at a glance: 30 August – prorogue

How are the housebuilders coping with the UK property market?

The week at a glance: 1 July – economics and cream

More on SSE

How to invest in renewable energy and make a profit

Dividend dogs vs diamonds: Part 1 – beware the yield

More on Vodafone

Business breakdown: 5 stories to make you money

The week at a glance: 22 July – results madness

Dividend dogs vs diamonds: Part 1 – beware the yield

Vodafone cuts dividend: are the shares still worth holding?

More Companies Analysed

A rare transport company for any political climate
Is Boohoo on the verge of an Asos-style collapse?
Is Brand Architekts really as cheap as it seems?