Income investors are used to hearing that a fat yield is a gift. It usually is not. When a company’s share price collapses, the yield goes up automatically, even if the underlying business is deteriorating.
On paper, Kraft Heinz (NASDAQ:KHC | KHC Price Prediction), Western Union (NYSE:WU), Granite Ridge Resources (NYSE:GRNT), and Shutterstock (NYSE:SSTK) all carry yields that scream “bargain.” Look under the hood, and each one shows the same warning pattern: tighter dividend coverage, a business under pressure, and a share price that has done most of the work inflating the yield.
The rule of thumb is simple: a dividend needs to be covered, and then some, by the right earnings base. For a traditional corporation, that means EPS and free cash flow. When payout ratios push above 100%, when free cash flow cannot cover the payment, or when leverage is quietly funding the distribution, the yield is telling you something the press release will not.
Kraft Heinz (KHC)
Kraft Heinz pays $0.40 quarterly, or $1.60 annualized, a payout the company has held steady since March 2020. That level itself was the product of a 36% cut from $0.625 during the last balance sheet crisis, so shareholders have been here before.
The company reported an FY2025 GAAP net loss of approximately $5.848 billion, driven by a $9.3 billion goodwill and intangibles impairment. Cash flow tells a friendlier story, with FY2025 operating cash flow of $4.462 billion comfortably covering the $1.898 billion dividend payout. The catch is the trend.
Kraft Heinz management guided FY2026 adjusted operating income down 14% to 18% alongside organic sales down 1.5% to 3.5%. Nevertheless, shares are down 52.77% over ten years. History matters here: KHC has previously covered dividends at 123.7% of operating cash flow, back in 2018, right before it was forced to reset. Kraft Heinz is Warren Buffett’s famous misstep.
Western Union (WU)
Western Union’s yield looks eye-popping because the stock does not. Shares are down 23.8% year to date and 68.7% over five years. The quarterly payout has been frozen at $0.235 since Q4 2020, meaning the “high yield” is entirely a function of the collapsing share price.
The coverage picture has deteriorated fast. Western Union’s Q2 2026 adjusted EPS of $0.31 missed estimates by 26.31%, following a Q1 miss of 36.35%. Management cut full-year adjusted EPS guidance to $1.25 to $1.35 from $1.75 to $1.85. Free cash flow is now brushing up against the payout: Q2 2026 FCF of $63.5 million versus dividends of $73.4 million, and Q1 2026 FCF of $62.2 million against $79.4 million paid.
When a payout is being financed out of cash reserves and buybacks are still running, the buffer is thinner than the yield suggests. Our earlier take on the Western Union transition laid out the bull case; the last two quarters have not helped it.
Granite Ridge Resources (GRNT)
Granite Ridge is a small-cap non-operated E&P paying $0.11 quarterly, or $0.44 annualized. The stock trades near $4.71, down 51.8% over the past five years, which mechanically inflates the yield.
The core problem is that total capital spending exceeds cash generation. FY2025 capex of $401 million, including $122 million of property acquisitions, overshot operating cash flow of $296.4 million by $104.6 million. Management subsequently raised its 2026 total capex guidance to between $345 million and $385 million. On earnings, Q1 2026 adjusted EPS of $0.02 missed the $0.09 consensus estimate by 77.8%, while the company produced a GAAP net loss of $47.03 million.
Balance-sheet pressure is building, too. Total liabilities rose 42% year over year to $648.2 million, and interest expense more than doubled to $10.3 million. CEO Tyler Farquharson framed 2027 as the free cash flow inflection point, which suggests the balance sheet may have to bridge the company’s overall spending gap until operating cash flow catches up.
Shutterstock (SSTK)
Shutterstock is the clearest textbook case of what a backward-looking yield can conceal. The board raised the quarterly dividend from $0.33 to $0.36 in January 2026 and declared another $0.36 payment in April. Then, on July 20, it suspended all future quarterly dividends, just six months after the increase. Shares have fallen 68.8% year to date and 94.1% over five years, making the trailing yield look generous right up until the payout disappeared.
The company’s Q1 2026 adjusted EPS of $0.58 missed the $0.96 consensus estimate by 39.6%, on revenue of $199.17 million, down 17.9%. Shutterstock posted a GAAP net loss of $47.57 million. Unadjusted free cash flow of $5.78 million did not come close to covering the $12.78 million quarterly dividend payment. Shutterstock’s preferred adjusted measure was $13.13 million, leaving almost no cushion even after merger-related costs were added back. Subscribers fell below the 1 million threshold to 993,000, while secular AI-content pressure remains front and center.
The proposed Getty Images merger, meanwhile, was abandoned in July after encountering UK competition concerns. Trailing EPS is negative $0.62. Raising the dividend into that setup was the warning. Suspending it six months later confirmed what the inflated yield had been saying.
The Bottom Line
These yields are high because the market is skeptical, and in each case the coverage math backs the skepticism up. A dividend cut or suspension can drag the share price down with it, so the headline yield is a warning label, not a cushion. Income investors chasing the payout should model what total return looks like if the check gets trimmed or stops arriving, and remember that yield alone has never been a buy thesis.
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