Are Your Dividends Safe? 4 Payouts the Cash Flow No Longer Covers
A 13% yield sounds like a windfall until you trace where the cash actually comes from. Four popular income stocks are paying dividends that their own financials struggle to justify, and the warning signs hiding in plain sight could cost…
A dividend check is only as reliable as the cash behind it. The screen used here is simple: compare what a company actually brings in (free cash flow for ordinary businesses, funds from operations for REITs) with what it pays out, then check whether debt is filling the gap. That matters most to retired people who spend the income. Hospital landlord Medical Properties Trust (NYSE: MPT) now yields about 13.7% after its shares fell 44.05% this year. A yield that high often means the market is pricing in risk, and the stock may not be a bargain.
The quick test: a dividend starts to look unsustainable when the right cash measure only covers it, when free cash flow is shrinking, or when rising debt is quietly paying for the dividend alongside buybacks and deals (we laid out the full set of signals that a high yield is about to be cut in a free report on dividend traps).
Medical Properties Trust: A 13% Yield Built on a Collapsing Share Price
Medical Properties Trust owns hospitals and rents them to operators in the U.S., the U.K. and Europe. It now trades under the ticker MPT. It pays $0.09 per quarter, or $0.36 per year, while the stock trades at $2.63.
That yield is high because the price collapsed. The payout itself has not grown much. Shares are down 27.95% in a month and 80.22% over five years. For a REIT, normalized FFO is the right coverage test, and second-quarter NFFO of $0.15 per share puts the payout ratio near 60%. The balance sheet shows the stress.
Adjusted net debt runs 8.9x EBITDAre, interest coverage is just 1.9x, and the company refinanced with $2.4 billion of secured notes at 9.25%. Its weighted-average debt rate is 5.369%. Recovery from the Prospect Medical bankruptcy is still uncertain. This REIT already cut its dividend from $0.29 in 2023 to $0.08 in 2024.
Management raised the payout to $0.09 and says it is focused on debt. At the time of the filing, chief executive Edward K. Aldag, Jr., said, “We continue to take decisive steps to strengthen our balance sheet through our refinancing transactions and strategic asset sales.” For the dividend to hold, transition tenants need to lift annualized cash rent to $1 billion by year-end, and the asset sales need to close.
AT&T: Buybacks and Spectrum Eat Most of the Free Cash Flow
AT&T (NYSE: T | T Price Prediction) pays $0.2775 per share quarterly, which works out to a yield of about 5.0% at $22.08. The dividend has stayed flat since April 2022, when it was cut from $0.52.
On earnings, coverage is comfortable: the dividend is roughly 46% of the raised adjusted EPS guidance of about $2.40. The cash picture is tighter. Third-quarter free cash flow of $4.95 billion fell 5.9% year over year. The dividend costs about $7.6 billion a year, and adding the roughly $10 billion in planned 2026 buybacks brings shareholder payouts to about $17.6 billion. Full-year free cash flow guidance is $18 billion+, so almost nothing is left over. Meanwhile, net debt to adjusted EBITDA rose to 3.13x from 2.68x after the EchoStar spectrum deal. Shares fell 12.17% over the past month as fears about Starlink overshadowed earnings.
Management guides for the dividend to stay at its current level through 2028, with free cash flow climbing to $21 billion+ by then. Buybacks are the flexible piece, so the board can slow them before it has to touch the dividend.
Verizon: Frontier Deal Pushes Leverage Higher Behind a 6% Yield
Telecom giant Verizon (NYSE: VZ) pays $0.7075 quarterly, up from $0.69 earlier this year, for a yield of about 6.4%. Its dividend records show a long run of step-up increases.
On paper, coverage is solid. The dividend costs about $11.76 billion a year, against 2026 free cash flow guidance of $21.94 billion to $22.14 billion, and it takes about 57% of the low end of adjusted EPS guidance. Leverage is the warning sign. Net unsecured debt to adjusted EBITDA rose to 2.5x from 2.2x at year-end 2025 after the Frontier Communications deal closed, and unsecured debt totals $136.5 billion. Add buybacks of up to $4.5 billion, and cash going to shareholders reaches about $16.26 billion before paying down any debt. Second-quarter revenue fell 0.7%.
The counter-case is strong. Second-quarter free cash flow grew 27.1%, and the stock is up 15.12% this year, so this yield comes from the payout, not from a falling price.
W. P. Carey: A Reset Dividend Still Exposed to Tenant Credit
W. P. Carey (NYSE: WPC), a diversified net-lease REIT, pays $0.95 quarterly. That is a forward yield of about 6.1% at $62.57.
For a REIT, AFFO is the right measure, because EPS is distorted by depreciation. Full-year AFFO guidance of $5.19 to $5.27 per share means a payout of about 73% at the low end. The warning signs are history and credit. The dividend was cut from $1.14 to $0.86 in late 2023 after the office spinoff. Second-quarter impairments reached $79.4 million, and European same-store rents fell 2.6% in constant currency.
This is the best bull case on the list: occupancy is 98.5%, and 95% of debt is fixed-rate at a weighted 3.2%.
What Income Investors Holding These Should Watch
Each quarter, check the coverage measure that fits each company: NFFO for Medical Properties Trust, AFFO for W. P. Carey, and free cash flow after buybacks for AT&T and Verizon. Track leverage against what each company has promised. A missed deleveraging target is usually the first crack. When a cut does come, it usually drags the share price down, so a high yield alone isn’t enough reason to invest.
Contact [email protected] for any questions or corrections.
Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
