The reason for my skepticism is risk.

When a company pays a double-digit yield, the risk is higher that the stock is going to perform badly or the dividend is going to be cut. It’s not a guarantee that those things will happen, but it is more likely to happen than when the dividend yield is lower.

With that knowledge, let’s find out whether 15% yielder Dynex Capital (NYSE: DX) is in danger of cutting its dividend.

Dynex Capital is a mortgage REIT. It borrows money and then lends it out at higher interest rates. The difference, after expenses, is called net interest income.

Last year, Dynex generated $5.9 million in net interest income while paying out $117.8 million in dividends. That means it paid 20 times more cash in dividends than it took in.

This year, I expect net interest income to rise significantly to $94.5 million. However, dividends paid are still forecast to be substantially higher at $133.2 million.

The dividend track record isn’t great either. Though Dynex has raised the monthly dividend twice in the past year from $0.13 per share to $0.17, it is still well below where it was 10 years ago.

At the time, Dynex paid a quarterly dividend of $0.72, which is 41% more than the current monthly dividend extrapolated to a quarterly dividend ($0.17 per month equals $0.51 per quarter). That $0.72 per share dividend in 2015 was cut to $0.63 in early 2016, and the company lowered the dividend again in 2017 to $0.54.

Two years later, Dynex began paying a monthly dividend, reducing it again to $0.15 ($0.45 quarterly) in mid-2019 and once more to $0.13 ($0.39 quarterly) in 2020.

So we have a stock that can’t afford its dividend and has cut the payout four times in the past 10 years.

Dynex Capital will very likely cut its dividend again soon.

The dividend is not safe.

Dividend Safety Rating: F

What stock’s dividend safety would you like me to analyze next? Leave the ticker in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name, and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.

The post Dynex: Will This 15% Yield Get Cut Again? appeared first on Wealthy Retirement.

I covered the stock twice in 2024, giving it an “F” rating both times.

In January 2024, I wrote that it had “about as bad a dividend history as I’ve seen” and said the dividend was “at great risk of being cut.”

Then, in November, I called the dividend “extremely unsafe and a strong candidate for a cut.”

At the time, AGNC was coming off of a year with negative net interest income (NII), the measure of cash flow that we use for mortgage REITs. It was expected to post another negative number in 2024.

Instead, the company generated $18 million in positive net interest income. However, it paid out $1.2 billion in dividends.

That’s like if you made $18 and gave your buddy $1,200. You might be a hell of a friend, but it’s not smart or sustainable.

This year, net interest income should be much improved at over $600 million, but dividends paid are expected to be more than double that figure at over $1.3 billion.

AGNC has slashed the dividend three times over the past 10 years. The last one was in April 2020, right as the pandemic was kicking in. The $0.12 per share monthly payout that was established then has remained the same since. That track record shows us that management is willing to slash the dividend when necessary – and it certainly seems necessary now.

With three recent dividend cuts and an expected dividend payout that is still miles above the amount of net interest income the company generates, AGNC’s dividend remains very unsafe.

Dividend Safety Rating: F

What stock’s dividend safety would you like me to analyze next? Leave the ticker in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name, and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.

The post AGNC Investment Corp.: Can This 14% Yielder Finally Afford Its Dividend? appeared first on Wealthy Retirement.

My only concern at the time was that net interest income, or NII, was expected to drop to $3.3 billion. That still would’ve been enough to pay the dividend, but it could have signaled the beginning of a negative trend. (Net interest income is how we measure financial companies’ ability to pay their dividends.)

Today, because the stock price has risen since then, OneMain yields 7.3%.

The company, also called OneMain Financial, is a subprime lender, offering credit cards, personal loans, auto loans, and other credit products. It has been operating for 113 years and has expanded to 47 states from 44 last year.

As for the company’s results, analysts – as they often do – got it wrong. Instead of reporting $3.3 billion in net interest income, OneMain generated $3.8 billion in NII in 2024.

It paid out $498 million in dividends for an ultra-low payout ratio of 13%.

This year, NII is forecast to rise to $3.9 billion, while the payout ratio is projected to decline to an even lower 11%.

I like to see payout ratios below 75% so I can be confident in the company’s ability to afford its dividend if it has a rough year or two. A payout ratio barely above 10% means OneMain has plenty of cash to pay the dividend even if NII were to take a massive hit.

The company began paying a quarterly dividend in 2019. The payout has risen every year by an impressive compound annual growth rate of 27%, though the increases have become considerably smaller in recent years.

The boost last year was 4%. OneMain has not raised the dividend since the second quarter of 2024, but it has also never cut the dividend. It occasionally pays a special dividend, though it hasn’t done so since 2021.

There are no concerns about OneMain Holdings’ ability to pay its dividend and no blemishes on its dividend-paying track record.

This 7.3% yielder’s dividend is safe.

Dividend Safety Rating: A

What stock’s dividend safety would you like me to analyze next? Leave the ticker in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name, and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.

The post OneMain Financial: A Fresh Look at a Popular 7.3% Yielder appeared first on Wealthy Retirement.

That’s probably not too surprising given its 21% yield and the fact that it’s controlled by legendary chairman Carl Icahn.

Icahn Enterprises is a holding company that owns a variety of businesses in the energy, real estate, and pharmaceuticals industries, among several others.

The company currently pays a $0.50 per share quarterly dividend. With the stock a little above $9, that comes out to a gigantic 21% yield.

How likely is the company to maintain such a high yield?

Icahn Enterprises generated $156 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2024. EBITDA is a surrogate for cash flow. I typically look at other metrics, such as free cash flow, funds from operations, distributable cash flow, etc., depending on the company – but Icahn Enterprises reports its results using EBITDA, so that’s what we’ll go off of.

This year, EBITDA is expected to nearly double to $293 million. However, both 2024’s and 2025’s forecasts are down from three years prior. The Safety Net model penalizes companies for negative three-year cash flow growth.

Another problem is how much the company is paying out in dividends compared with EBITDA. In 2024, while bringing in $156 million in EBITDA, it paid $391 million in dividends. This year, dividends paid are forecast to rise to $475 million.

Icahn’s total dividend payout last year was 251% of its EBITDA. In 2025, that figure is projected to be 162%.

In other words, the company doesn’t make enough money to pay its dividend.

Lastly, the company has cut the dividend twice in the past two years. From 2019 to the second quarter of 2023, Icahn paid shareholders $2 per share. That dividend has since been cut 75% to the current $0.50.

So we have a decline in EBITDA over the past three years, a couple of recent dividend cuts, and a dividend that is higher than the amount of money the company takes in. Those are all signs that another dividend cut is coming soon.

Dividend Safety Rating: F

What stock’s dividend safety would you like me to analyze next? Leave the ticker in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name, and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.

The post Can Icahn Enterprises Maintain Its Massive 21% Yield? appeared first on Wealthy Retirement.

The S&P 500’s dividend yield has dropped to 1.23% – the lowest level we’ve seen since 2001.

And it’s not just because stock prices have gone up. The market has fundamentally changed in ways that many income-focused investors haven’t fully grasped yet.

Let me explain why this matters and what you can do about it.

Think back to the old days, when you could build a solid retirement portfolio around blue chip dividend stocks. Companies like Coca-Cola, AT&T, and Procter & Gamble were the backbone of many income portfolios.

Those days are fading fast.

The S&P 500 looks completely different today than it did just a decade ago. Technology companies, which made up about 18% of the index in 2014, now account for more than 30%. Meanwhile, consumer staples and utilities, two mainstays for dividend investors, make up just 5.4% and 2.4%, respectively.

This shift toward tech has dramatically changed what it means to be a dividend investor.

Why? Because tech companies typically pay very small dividends – if any at all. Instead of paying out their excess cash to shareholders, they prefer to reinvest it into growth or buy back shares.

Even more telling is what’s happened to so-called high-dividend strategies. If you buy a high-dividend ETF today, you might be surprised to learn that “high” now means about 2.7%. That’s a far cry from the 4% to 5% yields these strategies used to deliver.

Think about that for a minute. Even if you explicitly focus on dividend-paying stocks, you’re still looking at yields well below what you can get from a simple Treasury bond these days. For the first time in over a decade, bonds are actually paying more than dividend stocks.

But here’s the real kicker: To get those higher dividend yields, you often have to give up exposure to the market’s fastest-growing companies. Most dividend funds have only tiny allocations to technology stocks – the very sector that’s been driving much of the market’s growth and innovation.

This puts income investors in a tough spot. Do you chase yields and potentially miss out on growth? Or do you accept lower yields in hopes of capturing bigger capital gains?

There’s no easy answer, but there is a smarter way to think about it. Instead of focusing solely on dividends, investors need to look at their total return potential – combining modest dividend yields with bond income and potential price appreciation.

Consider this three-pronged approach:

1. Build a core portfolio in dividend payers with strong fundamentals and growing payouts.
2. Include a very healthy dose of bonds, which are now offering some of the highest yields we’ve seen in a decade.
3. Add a strategic allocation in growth stocks (yes, even those tech companies with little to no yield).

This might feel like heresy to investors who primarily seek out dividend income. But the market has changed, and our strategies need to change with it. With corporate bonds yielding over 5% and Treasurys above 4%, bonds can now provide the steady income that dividend stocks used to deliver.

Of course, change is the nature of investing. As market conditions shift, so should your portfolio strategy. Adaptability is essential to long-term success, so don’t let old rules of thumb keep you from adapting to new market realities. The days of exclusively living off of stock dividends may be over, but that doesn’t mean you can’t build a solid income portfolio.

Remember, successful investing isn’t about clinging to what worked in the past – it’s about understanding how markets evolve and adjusting your strategy accordingly. Today’s market may not be as friendly to traditional dividend investing as it once was, but it still offers plenty of opportunities for those who are willing to keep an open mind.

The post The New Era of Dividend Investing Is Here appeared first on Wealthy Retirement.

The company has paid a $0.48 per share quarterly dividend since 2014, which comes out to a 10% yield on the stock’s current price. Can shareholders expect to continue receiving $0.48 per share each quarter?

Starwood Property Trust uses a metric it calls “distributable earnings” to measure its cash flow.

In 2023, distributable earnings fell nearly 9% from $726 million to $663 million. When Starwood releases its full-year results in February, distributable earnings are expected to be $677 million.

Because 2023’s $663 million was below the prior year’s figure, the stock’s dividend safety rating gets a one-point penalty. If 2024’s total comes in at less than $663 million, that downgrade will remain in effect.

In 2023, Starwood paid $601 million in dividends for a 91% payout ratio. The total dividend payout is forecast to inch up to $610 million in 2024, but with distributable earnings also projected to rise, the payout ratio would actually drop to 90%.

With mortgage REITs, I’m comfortable with payout ratios of 100% or lower, as REITs must pay out 90% of their earnings. (Distributable earnings aren’t the same as regular earnings, as distributable earnings factor out noncash items.) Since REITs have that higher requirement and typically aim to provide the most income possible to investors, a 100% payout ratio is reasonable.

If it goes above 100%, it’s a problem. But up to 100% is fine as long as distributable earnings – or whatever cash flow metric the company uses – aren’t expected to fall.

So we have a company that has paid a stable dividend for 10 years and has a payout ratio within my comfort zone. The only yellow flag is the decline in distributable earnings in 2023. If the growth number is positive in 2024, all is forgiven, and the company’s dividend safety rating will be perfect.

Until then, we can’t ignore the one-year decline in distributable earnings, because it increases the risk of a dividend cut just a little. But at the moment, I’m not worried.

Dividend Safety Rating: B

Safety Net Did It Again

In 2023, none of the nine stocks rated “A” in this column cut their dividend. Neither did any of the eight rated “B” or the eight rated “C.” But once we got to the stocks with “D” and “F” grades, things changed. Two of the nine “D”-rated stocks cut their dividends, and six of the nine “F”-rated stocks lowered their payouts.

The numbers were similar in 2024.

Of the 10 stocks rated “A,” none cut their dividends, while three raised them.

“B”-rated stocks were also able to maintain their payouts, with zero cuts and six raises out of 14 stocks.

We rated 11 stocks “C” last year. Two raised their dividends, and two cut them, including longtime Dividend Aristocrat 3M (NYSE: MMM), which had raised its dividend 66 years in a row.

We also saw two raises and two cuts among the five “D”-rated stocks.

Lastly, as expected, out of nine “F”-rated stocks, there were no dividend increases and three dividend cuts.

Below, you can see the average change in the dividend for each grade, measured from the time we evaluated each stock to the end of 2024.

The data shows that stocks rated “A” and “B” for dividend safety are unlikely to lower their dividends, while “D”-rated and especially “F”-rated stocks have a strong possibility of a dividend cut.

Keep requesting stocks you’d like us to analyze in Safety Net by entering the ticker symbol in the comments section. Remember, we can only analyze individual stocks, not ETFs or other types of funds. Cash flow is a vital metric in the Safety Net formula, and ETFs and other funds don’t produce cash flow.

The post Starwood Property Trust: A 10% Yielder That’s Almost Perfect appeared first on Wealthy Retirement.

FS KKR’s portfolio is worth $14.1 billion and contains loans to 208 companies, which have a median EBITDA, or earnings before interest, taxes, depreciation, and amortization, of $124 million.

Software is the top sector in the portfolio, accounting for nearly 16% of its holdings, followed by capital goods at almost 14% and commercial and professional services at just under 13%.

But what’s really exciting to investors is the fact that the portfolio yields 12% and the stock yields a whopping 14.5%.

Can investors expect to keep earning such a high yield going forward?

Because FS KKR is a lender, we look at a metric called net interest income to determine whether it can afford to pay its dividend. Net interest income is the amount of income a company generates from its loans after paying its bills.

FS KKR has done an excellent job of growing its net interest income over the past few years.

In 2023, FS KKR paid shareholders $823 million in dividends, or 62% of its net interest income. This year, even though the total dividend payout is forecast to increase to $964 million, the payout ratio is projected to dip to 59% because net interest income is expected to rise by 23%.

So the company can easily afford its dividend.

FS KKR’s current regular quarterly dividend is $0.64 per share, which comes out to a 13.1% yield. When we include the special dividend, which the company typically pays several times each year, the yield climbs to 14.5%.

However, FS KKR has cut its regular dividend several times over the past decade.

We’ve seen a lot of companies like this in Safety Net lately: high yielders that are generating plenty of cash flow to pay their dividends but have track records of cutting their payouts when necessary. FS KKR Capital is in that exact situation.

I don’t believe a dividend cut is imminent. But if net interest income starts to slip, be aware that management is not afraid to slash the payout to shareholders.

Dividend Safety Rating: C

What stock’s dividend safety would you like me to analyze next? Leave the ticker in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds or closed-end funds.

The post FS KKR Capital: Intriguing 14.5% Yielder… or Serial Dividend Cutter? appeared first on Wealthy Retirement.

The business development company, or BDC, lends money to and invests in private companies. The stock is very popular with income investors because of its 13.2% yield, its low share price, and the fact that it pays a dividend monthly.

Let’s see whether the company can actually afford its dividend.

In Prospect Capital’s fiscal year that ended on June 30, 2023, it generated $421 million in net investment income (NII). NII is the measure of cash flow that we use for BDCs. It tells us how much money the company’s investments made after expenses.

That 2023 NII figure was up sharply from the previous two years.

When the company reports results from its most recent fiscal year next month, I estimate it will report $457 million in NII. We’re seeing solid growth over the past year and over the past three years, which is a great sign.

You can see from the chart above that NII has been steadily growing, as has the total amount of dividends paid – though it’s important to note that the total dividend payout has increased because the number of outstanding shares has risen, not because the dividend itself has risen. The company’s monthly dividend per share has remained at $0.06 for more than six years.

BDCs must pay out 90% of their profits in dividends, so I’m OK with them paying out up to 100% of their NII. (Profits and NII aren’t the same thing, but they are similar.) Prospect Capital’s 2023 payout ratio of 71% and its expected 79% payout ratio in 2024 are well within my comfort zone.

The only problem I have with Prospect Capital’s dividend safety is its history of reducing the payout to shareholders.

Granted, it hasn’t done so since 2017, but it slashed its dividend twice in the three years before that – and pretty dramatically. The dividend is 46% lower now than it was prior to the decline.

If Prospect Capital keeps its dividend stable over the next few years, the past cuts will start to age out of the Safety Net model, and its grade should improve. Until then, even though the company can afford the dividend right now, investors should be wary that another cut could be coming if times get tough.

Dividend Safety Rating: C

What stock’s dividend safety would you like me to analyze next? Leave the ticker in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds or closed-end funds.

The post Prospect Capital’s 13.2% Yield Is Hard to Trust appeared first on Wealthy Retirement.

The company is an innovative real estate investment trust, or REIT, that leases its 108 real estate assets to 30 cannabis operators in 19 states.

REITs are known for paying sizable dividends, and Innovative Industrial Properties’ 7% annual yield makes it one of the higher-yielding REITs.

Can it continue to pay such a strong dividend, or is management about to harsh investors’ buzz?

As you likely know by now, cash flow is one of the key factors we consider. For REITs, we use funds from operations (FFO) as our measure of cash flow.

Innovative Industrial Properties’ FFO has been rising for the past few years. It totaled $232 million in 2023 (up from $211 million the prior year), and I expect it to increase to around $250 million in 2024.

Last year, the company paid shareholders $204 million in dividends for an 88% payout ratio.

I’m comfortable with REITs paying out up to 100% of their FFO in dividends, as they are required by law to pay out at least 90% of their earnings.

(Earnings aren’t the same as cash flow or FFO, but because of that obligation, REITs often pay out nearly all of their FFO to shareholders. That’s why we raise our payout ratio limit from our typical 75% for normal stocks to 100% for REITs.)

This year, I expect Innovative Industrial Properties’ payout ratio to rise to 97% – even closer to my limit. It will be worth watching to make sure it doesn’t go over 100%, because if it does, I will have to lower the stock’s dividend safety rating.

However, the company has raised its dividend at least once every year (and 16 times in total) since it began paying one in 2017, so management has shown its commitment to rewarding shareholders.

In short, keep an eye on that payout ratio… but for now, there doesn’t appear to be anything too concerning. Innovative Industrial Properties’ yield should stay as high as Woody Harrelson.

Dividend Safety Rating: A

What stock’s dividend safety would you like me to analyze next? Leave the ticker in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds or closed-end funds.

The post Innovative Industrial Properties: A True “High” Yielder appeared first on Wealthy Retirement.

Three days later, shares of Stellantis IPO’d on the New York Stock Exchange.

Since then, the company has increased its dividend every year, with its current dividend of just over $1.65 equating to a yield of 8.4%. (Interestingly, it pays just one annual dividend rather than making four quarterly payouts.)

The big question, though, is whether its dividend is sustainable or at risk of being slashed in the future.

Let’s crunch some numbers to see where it stands… and to provide an answer for Wealthy Retirement reader Yariv, who left us a Facebook comment last week asking us to review Stellantis’ dividend.

As always, let’s take a look at the company’s free cash flow.

A big reason that Stellantis has been able to raise its dividend every year is its free cash flow growth.

Free cash flow in 2021 was just under $10 billion. In 2022, it rose to over $11.3 billion, and in 2023, it topped $12.2 billion.

That comes out to a phenomenal compound growth rate of 51.9%!

However, analysts are skeptical that Stellantis can continue growing its free cash flow at such a torrid pace.

Forward-looking estimates indicate a decrease of nearly 20% in the next year.

Fortunately, that seems to be the only threat to the company’s dividend.

Despite raising its dividend in each of the past three years, the company still has a healthy payout ratio. In 2023, Stellantis paid out $4.2 billion of its $12.3 billion in free cash flow for a payout ratio of 34.2%, which is well below our threshold of 75%.

The payout ratio should climb this year due to the projected decline in free cash flow – but only to 44.5%.

With the forward-looking free cash flow estimates as my only concern, I am happy to give this stock’s dividend safety a solid “B.”

Dividend Safety Rating: B

What stock’s dividend safety would you like us to analyze next? Leave the ticker in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds or closed-end funds.

The post Can Stellantis Maintain Its Stellar 8.4% Yield? appeared first on Wealthy Retirement.