6 Dividend Stocks Where the Yield Is Getting Bigger for All the Wrong Reasons

A 20.9% yield sounds like a retirement plan. At Arbor Realty Trust (NYSE:ABR), it is mostly the result of a stock that fell 69.27% in a year. A dividend is only worth what the company can keep paying, and the six names below each have at least one warning sign flashing.

This quick test shows a payout looks sustainable when the right earnings measure covers it, free cash flow pays for it and debt isn’t funding it. Remember that yield is the dividend divided by the share price. When the price falls, the yield rises even though the payout hasn’t grown. (The full checklist of seven warning signs that a big yield is about to be cut is available in a free dividend trap guide if you want the full checklist.)

Arbor Realty Trust (ABR): Already Cut and Still Uncovered

Arbor pays $0.17 a quarter, or $0.68 a year. The $3.25 price means an ultra-high yield of about 20.9%. The shares fell 38.1% in the past month alone.

For a mortgage REIT, the right coverage measure is distributable earnings (DE). Q2 DE fell to $0.10 per share from $0.25, even though the dividend had already been cut to $0.17 from $0.30. That puts the DE payout ratio at about 170%. Credit quality is getting worse: a $38.2M provision for credit losses and 19 non-performing loans carrying $428.8M in unpaid principal. The filing itself flags that DE may not cover the dividend over time.

The payout can hold only if credit losses level off and DE climbs back toward the dividend.

B&G Foods (BGS): Paying a Dividend While Borrowing at 11%

B&G Foods (NYSE:BGS) yields about 15.1% on a $0.38 annualized payout. The quarterly dividend was already halved this year to $0.095 from $0.19, and the stock is down 85.82% over five years.

On adjusted EPS guidance of $0.575 to $0.675, the payout ratio is about 66% at the low end. That looks manageable, but debt is the larger risk. B&G replaced its 5.25% notes due 2027 with $475M of 11.00% senior notes due 2031, and it guides to $157.5 million to $162.5 million of interest expense this year. Free cash flow in 2025 was roughly $70.7 million against $60.6 million in dividends, which leaves very little room. Base business volume fell 4.3%, and the filing mentions leverage that affects the company’s ability to fund dividends.

To keep paying, B&G needs proceeds from asset sales to cut debt and base volumes to stop falling.

Starwood Property Trust (STWD): Same Dividend for 12 Years, Smaller Earnings Behind It

Starwood Property Trust (NYSE:STWD) has paid $0.48 every quarter since 2014. That works out to about 15.2% at $12.65, after shares fell 24.79% over the past year.

Q2 DE came in at $0.40 per share against the $0.48 dividend, a payout ratio of about 120%. GAAP net income was only $6.56M after $30.2M in credit provisions and $34.2M in derivative losses. Keeping a payout flat through this kind of stress is a warning sign in itself.

In the company’s Q2 release, chief executive Barry Sternlicht said Starwood expects to resolve “nearly $900 million of underperforming assets by year-end or shortly thereafter.” If that happens and the freed-up capital gets invested profitably, DE could catch back up to the dividend.

Ford Motor (F): Heavy Losses and Debt Behind the Dividend

At Ford Motor (NYSE:F | F Price Prediction), the regular $0.15 quarterly payout works out to a high yield of about 5.0% at $12.03. The stock dropped 17.7% in a month, in a selloff testing Wall Street’s faith in an earnings recovery.

For an automaker, free cash flow is the better test because special charges distort GAAP EPS. Trailing diluted EPS is -$1.88, and Q2 posted a $1.33B net loss. Q2 free cash flow fell 50.5% to $2.09B, debt-to-equity is 4.66, and Model E losses are expected to reach about $4.0B in 2026. Ford also cut its dividend during the 2020 downturn.

On the other side, adjusted free cash flow guidance of $6.0B to $7.0B would easily cover the roughly $2.35 billion annual cost of the regular dividend. That guidance excludes “a material downturn in the US economy.”

Kohl’s (KSS): Earnings Propped Up by Tariff Refunds

Kohl’s (NYSE:KSS) now yields about 2.5%, after its quarterly dividend was cut to $0.125 from $0.50 in 2025. Its record shows repeated resets, which is what a dividend trap looks like after the cut.

Q2 EPS of $1.28 included about $150M in tariff refunds, and full-year guidance builds in roughly 65 cents of tariff benefit. Comparable sales fell 0.9% and Sephora sales fell 4%. Operating cash flow was -$74 million in the April quarter, and the dividend was paid anyway.

Optimists point to $821 million in cash and no ABL borrowings. Comps need to turn positive without help from tariff refunds.

Franklin Resources (BEN): Payout Ratio Near 90%

Franklin Resources (NYSE:BEN), now Franklin Templeton, yields about 4.1% on $1.32 a year. Its yield comes from the payout itself, since the stock rose 43.59% over the past year.

Coverage is thin. Trailing GAAP EPS of $1.47 means a payout ratio of about 90%. Fiscal Q3 included a $100M regulatory settlement and $1.1B of long-term net outflows at Western Asset, and fee revenue depends on market levels. On the plus side, adjusted EPS of $0.72 beat the $0.66 estimate, and long-term net inflows reached $18.4B. Flows need to stay positive.

A Repeatable Test Before You Buy the Yield

Take a look at these three things: whether the right earnings measure covers the payout, whether free cash flow funds it, and whether the yield rose because the price fell. Dividend cuts usually drag the share price down too, so investors lose income and capital together. Yield by itself shouldn’t drive a purchase, and similar red flags show up in our roundup of stocks paying more than they earn and our closer look at Ford’s dividend safety.

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