Western Union Yields Nearly 15%. These 6 Dividend Stocks Could Be Headed for a Painful Cut
A 14.9% yield sounds like a windfall until you see what is propping it up. Six dividend stocks are flashing the same warning signs, and the companies shedding their best businesses may be the most dangerous of all.
Western Union (NYSE:WU | WU Price Prediction) shares have fallen 53.47% over five years, and that slide has pushed the stock’s yield to roughly 14.9%. A yield that big tells you more about the stock’s decline than about the payout. Several companies below have spun off, sold or are moving to shed businesses while maintaining their dividends. When the unit that leaves was a strong earner, the business left behind has to fund the same check with less earning power. On the cash flow statement the deal can look fine, while the damage stays out of sight.
Quick test: a dividend is unsustainable when earnings don’t cover it, free cash flow falls short of it, or new debt is effectively funding it. None of these five is a REIT, MLP or BDC, so EPS payout and free cash flow are the right metrics. (We rounded up seven warning signs that a big yield is about to be cut in a free dividend trap guide here.)
FedEx (FDX): Spun Off Its Highest-Margin Segment, Kept the Streak Alive
FedEx (NYSE:FDX) yields about 1.67%, and income investors value it for the run. Management called its latest raise the sixth consecutive annual dividend increase, up 5% after adjusting for the FedEx Freight spinoff.
FedEx completed the spin-off of FedEx Freight, historically its highest-margin segment. The core Federal Express unit posted a full-year adjusted operating margin of just 7.7%, and the per-share payout reset from $1.45 to $1.22. FedEx also kept about $350 million in stranded costs and has to monetize its retained Freight stake within 24 months. In fiscal Q4, operating income fell 21.94% even though revenue rose 12.54%.
Freight’s adjusted operating margin fell 570 basis points in its final quarter under FedEx, and coverage is sufficient. The $4.88 annualized dividend is about 28% of the midpoint of calendar 2026 EPS guidance. The remaining risk is execution: those stranded costs have to be gone by the CY27 exit rate.
General Mills (GIS): Yogurt Is Gone and Free Cash Flow Trails the Dividend
General Mills (NYSE:GIS) yields roughly 7.5%, but that figure grew mostly because the stock fell 30.81% over one year. The quarterly payout has stayed flat at $0.61.
The company sold its U.S. yogurt business for a $1.05B pre-tax gain. Its disclosures don’t break out yogurt’s margins against the retained portfolio, and the numbers show a shrinking business left behind. Fiscal Q1 2027 net sales fell 2.83%, and adjusted gross margin slid to 33.3%. Operating cash flow of $297.8M minus capex leaves about $207.3M, well short of the $330.5M paid in dividends. The payout matches 76% to 81% of guided adjusted EPS, while adjusted operating profit is guided down 13% to 8%. Leverage stands just above four times, and the CFO expects it to take “at least a couple years” to get back to the three-times target.
General Mills needs its $750M+ in cost savings and free cash flow conversion near 95% to maintain the payout.
Verizon (VZ): An Ironclad Promise on a Heavier Balance Sheet
Verizon (NYSE:VZ) yields about 6.5% on a $0.7075 quarterly dividend, and management calls the payout “still ironclad”.
The warning sign is debt. Unsecured debt totals $136.5B, and net unsecured leverage rose to 2.5x from 2.2x after the Frontier deal. Management also wants to “dramatically reduce our exposure to non-core assets,” which shrinks the asset base. GAAP net income fell 21.07%, and the shares dropped 13.67% over one month.
Coverage still looks healthy. Free cash flow is forecast at $21.94–$22.14B, and the dividend matches roughly 57% of the bottom of EPS guidance. Verizon now has to bring leverage down to 2.0 to 2.25 times by 2027.
Western Union (WU): Buybacks Paused to Shield a 14.9% Yield
Western Union has paid $0.235 every quarter since 2021, while the stock fell to $6.31.
Fundamentals are slid. Q2 adjusted EPS of $0.31 missed expectations of $0.42, operating income fell 31.45%, and cash dropped 34.32%. Debt stands at $2.7 billion, and management paused buybacks “to maintain our debt to EBIT ratios”. The payout looks covered at 70% to 75% of guided EPS, but that guidance depends on closing Intermex, which management expects will push leverage above historical levels.
The CEO says the company has “sufficient financial capacity” to keep the dividend. That depends on reaching the $200 million savings target.
Spectrum Brands (SPB): What a Smarter Divestiture Looks Like
Spectrum Brands (NYSE:SPB), yielding about 2.4%, is the contrast. With Oaktree, it is working toward separating its home and personal care (HPC) business, its weakest unit at a 5.4% adjusted EBITDA margin. Excluding tariff refunds, adjusted EPS of 89 cents covers the $0.47 dividend, and net leverage is about one times.
Before You Chase Any of These Yields
When a company cuts its dividend, the stock usually drops too, so a high-yield buyer can lose income and principal at the same time. After a sale, look at what the company kept and whether it earns enough to cover the payout. A yield by itself never justifies buying a stock.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
