Why High Dividend Yields Aren’t Always a Good Thing

The Smart Investor11-16

A double-digit dividend yield looks tempting. Many income-seeking investors see a high percentage, assume they’ve found reliable income, and move on without digging deeper. But there is the problem...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2583668412?lang=en_US&edition=fundamental","thumbnail":"https://thesmartinvestor.com.sg/wp-content/uploads/2023/10/dividends-300x200.png","is_english":true,"pubTime":"2025-11-16 11:30","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2583668412","market":"nz","top_or_hot":-1,"title":"Why High Dividend Yields Aren’t Always a Good Thing","media":"The Smart Investor","content":"<div>\n<p>A double-digit dividend yield looks tempting. \n\nMany income-seeking investors see a high percentage, assume they’ve found reliable income, and move on without digging deeper.\n\nBut there is the problem...</p>\n\n<a href=\"https://thesmartinvestor.com.sg/why-high-dividend-yields-arent-always-a-good-thing/\">Source Link</a>\n\n</div>\n","source":"thesmartinvestor_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Why High Dividend Yields Aren’t Always a Good Thing</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhy High Dividend Yields Aren’t Always a Good Thing\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-11-16 11:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://thesmartinvestor.com.sg/why-high-dividend-yields-arent-always-a-good-thing/><strong>The Smart Investor</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>A double-digit dividend yield looks tempting. \n\nMany income-seeking investors see a high percentage, assume they’ve found reliable income, and move on without digging deeper.\n\nBut there is the problem...</p>\n\n<a href=\"https://thesmartinvestor.com.sg/why-high-dividend-yields-arent-always-a-good-thing/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0898667661.SGD","symbol_name":"JPMorgan Funds - Asia Pacific Income A (mth) SGD-H","start_time":0,"source_url":"https://thesmartinvestor.com.sg/why-high-dividend-yields-arent-always-a-good-thing/","article_id":"2583668412","we_media_id":null,"thumbnails":["https://thesmartinvestor.com.sg/wp-content/uploads/2023/10/dividends-300x200.png"],"rights":{"source":"thesmartinvestor_highlight","url":"https://thesmartinvestor.com.sg/why-high-dividend-yields-arent-always-a-good-thing/","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2583668412","pubTimestamp":1763263800,"columns":[],"sourceInfo":{"source_id":"thesmartinvestor_highlight","name":"The Smart Investor"},"weMediaInfo":null,"summary":"High dividend yields catch your eye for all the right reasons. But what looks like a generous payout today may be a warning sign of trouble tomorrow.","collect":0,"end_time":0,"defaultTopTitle":"thesmartinvestor.com.sg","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0898667661.SGD":"JPMorgan Funds - Asia Pacific Income A (mth) SGD-H","LU0878005551.USD":"UBS (LUX) KEY SELEC ASIA ALLOCATION OPPORTUNITY (USD) \"P\" (USD) ACC","SG9999002950.SGD":"United Asian Growth Opportunities SGD","LU2242652126.USD":"FIDELITY FUNDS GLOBAL DIVIDENDS PLUS \"A\" (USD) INC","LTM":"南美航空集团","LU0979878070.USD":"FULLERTON LUX FUNDS - ASIA ABSOLUTE ALPHA \"A\" (USD) ACC","SGXZ24219693.SGD":"UNITED SG DYNAMIC INCOME FUND \"A\" (SGD) INC","LU1920063259.USD":"FIDELITY FUNDS GLOBAL DIVIDEND PLUS \"A\" (USDHDG) INC","BN4.SI":"吉宝有限公司","CFA.SI":"NikkoAM-STC Asia REIT","LU0261945553.USD":"FIDELITY ASEAN \"A\" ACC","LU0235996351.USD":"UBS (LUX) KEY SELECTION SICAV - ASIAN EQUITY (USD) \"P\" (USD) ACC","LU1770036033.HKD":"NINETY ONE GSF ASIAN EQUITY \"A\" (HKD) ACC","SG9999000475.SGD":"Aberdeen Standard Singapore Equity SGD","LU0192582467.USD":"SCHRODER ISF ASIAN EQUITY YIELD \"A\" (USD) INC MF","LU0516423091.SGD":"FULLERTON LUX FUNDS - ASIA FOCUS EQUITIES \"I\" (SGD) ACC","LU0588545490.SGD":"Eastspring Investments - Asian Equity Income AS SGD","LU0261947096.USD":"FIDELITY FUNDS  SUSTAINABLE ASIA EQUITY \"A\" (USD) ACC","SG9999014492.USD":"NIKKO AM ASEAN EQUITY \"A\" (USD) ACC","LU0384037296.USD":"ALLIANZ ASIAN MULTI INCOME PLUS \"AT\" (USD) ACC","LU1282649810.SGD":"Allianz Asian Multi Income Plus Cl AMg DIS H2-SGD","LU0084288322.USD":"Natixis Asia Equity RD USD","BUOU.SI":"星狮物流工业信托","LU0823417653.USD":"BNP PARIBAS SUSTAINABLE GLOBAL LOW VOL EQUITY \"C\" (USD) ACC","RJAW.SI":"DBS MB ePW240902","8C8U.SI":"Cent Accom REIT","LU0762540952.USD":"HSBC GIF MANAGED SOLUTIONS ASIA FOCUSED INCOME \"AC\" (USD) ACC","SG9999002604.SGD":"LionGlobal Singapore/Malaysia SGD","LU0441851309.USD":"JPM ASEAN EQUITY \"A\" ACC","LU0096374516.USD":"CT (LUX) I ASIA EQUITY INCOME \"DU\" (USD) ACC","SGXZ43160589.SGD":"UNITED SG DYNAMIC INCOME FUND \"A\" (SGD) ACC","BK6033":"金融交易所和数据","LU0029875118.USD":"TEMPLETON ASIAN GROWTH \"A\" INC","LU0205439572.USD":"富达亚太股息基金","LU0955623706.USD":"SCHRODER ISF ASIAN DIVIDEND MAX \"A\" (USD) ACC","BK6142":"多户式住宅房地产信托","S68.SI":"新加坡交易所","SG9999003826.SGD":"日兴资管新加坡股息基金 SGD","D5IU.SI":"力宝印尼零售信托","SG9999006266.SGD":"MANULIFE SINGAPORE EQUITY \"A\" (SGD) ACC","SG9999001903.USD":"Aberdeen Standard Pacific Equity USD","LU0251144936.SGD":"Fidelity Sustainable Asia Equity A-SGD","SG9999013486.USD":"LIONGLOBAL SINGAPORE DIVIDEND EQUITY (USD) INC A","SGXZ27511609.SGD":"NIKKO AM SINGAPORE DIVIDEND EQUITY \"SGD\" (SGD) ACC","LU0441854154.USD":"JPM ASIA PACIFIC EQUITY \"A\" (USD) ACC","D05.SI":"星展集团控股","LU1634259557.SGD":"Eastspring Investments - Asian Low Volatility Equity Fund AS SGD-H","BK4008":"航空公司","LU0672654166.SGD":"FTIF - Templeton Asian Growth A (acc) SGD-H1","IE00BGHQDM52.EUR":"GUINNESS ASIAN EQUITY INCOME \"C\" (EUR) ACC"},"translate_title":"为什么高股息收益率并不总是一件好事","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"S68.SI":0.9,"D5IU.SI":1,"BN4.SI":1,"8C8U.SI":0.9,"RJAW.SI":0.6,"D05.SI":1,"CFA.SI":0.9,"LTM":1,"BUOU.SI":1},"content_text":"A double-digit dividend yield looks tempting. \n\nMany income-seeking investors see a high percentage, assume they’ve found reliable income, and move on without digging deeper.\n\nBut there is the problem: Very high yields often appear for the wrong reasons. \n\nThat attractive number may be masking fundamental weakness rather than signaling genuine opportunity.\n\nIn Singapore, the average dividend yield sits around 6.2% for REITs, while banks offer similar yields in the 5%+ range today.\n\nWhen you’re hunting for income, a yield of 8% or more stands out. \n\nBut high yield isn’t always synonymous with safety. \n\nIt can be the financial equivalent of a flashing warning light. Here’s why.\n\nWhy High Yields Can Be Misleading\n1. Falling Share Prices Inflate Yields\nDividend yield equals dividend per share divided by share price. \n\nWhen the share price falls sharply but the dividend hasn’t been cut yet, the yield looks artificially high.\n\nA clear example is Lippo Malls Indonesia Retail Trust (SGX: D5IU), or LMIRT.\n\nThe REIT’s unit price fell sharply over the years as tenant weakness, declining distributable income, and multiple distribution per unit (DPU) cuts eroded investor confidence.\n\nBut as the share price dropped faster than its payout, the headline dividend yield appeared “high” – at one point rising into the double-digit range even though the REIT’s fundamentals were deteriorating.\n\nBy 2023, its payout had collapsed to S$0.0004 per unit (2.35% yield) before dividends were suspended.\n\n2. Unsustainable Payout Ratios\nA company paying out more than it earns (payout ratio > 100%) is draining reserves to maintain dividends. That can’t last. \n\nIn Singapore, sustainable payers typically keep payout ratios between 40% and 60%, leaving room for reinvestment. \n\nDBS Group Holdings (SGX: D05) maintains a payout ratio of 67.5%, while Keppel Ltd (SGX: BN4) sits at 69%, according to Yahoo Finance.\n\nWhen the ratio climbs significantly above these levels, dividend cut risk rises.\n\n3. Earnings or Cash-Flow Pressure\nEven if the dividend holds today, cracks may already be forming underneath. \n\nRising debt costs, slower rental growth, or weaker cash flow all threaten future payouts.\n\nA high yield can be a side effect of falling prices, thin profits, or unsustainable payouts.\n\nFrasers Logistics and Commercial Trust (SGX: BUOU), or FLCT, is a recent example of a REIT that saw its DPU decline as rising costs weighed on performance. \n\n\nHigher operating and financing expenses, combined with weaker contributions from some overseas assets, squeezed distributable income and led to a lower payout.\n\nBetter Metrics to Watch Than Yield Alone\nIf you want to avoid yield traps, look beyond the headline number.\n\n\nPayout Ratio: What percentage of earnings are being paid out?\nFree Cash Flow: Is the company generating enough cash to fund its dividend after expenses and debt?\nBalance-Sheet Health: Gearing, net debt-to-equity, and refinancing schedule matter more than any single year’s payout.\nDividend Track Record: Has the company grown dividends steadily or cut them under stress?\n\nComparison: Safe vs Unsustainable Dividend Payer\nFor the past 12 months prior to 30 September 2025 (LTM), DBS declared total dividends of S$2.85 per share. \n\nThat works out to a yield of around 5.3%, modest by headline standards but grounded in genuine profit strength and disciplined capital management. \n\nNow contrast that with parts of the REIT sector. \n\nSeveral high-yield REITs are boasting above-7% distributions in 2025, but many got there for the wrong reasons — unit prices fell as investors priced in rising debt costs and flat income growth. \n\nTheir yields look impressive on paper, yet the fundamentals tell a different story. \n\nThe difference isn’t just the percentage. \n\nDBS’s dividend comes from strength; some REIT yields come from strain. \n\nOne signals financial health, while the other demands a closer look.\n\nWhat This Means for Investors\nChasing the biggest yield on the board is how many investors fall into yield traps.\n\nThe smartest income investors know yield alone tells you nothing about sustainability.\n\nA moderate 4% to 6% yield from a quality business with steady cash flow can often outperform a shaky 10% yield that collapses with the next rate hike or profit drop.\n\nGet Smart: Yield Isn’t the Shortcut to Safety\nA high dividend yield feels like a bargain – until you realise the bargain came with hidden risk.\n\nExperienced investors treat dividends as part of a bigger picture: profits, balance-sheet strength, and the ability to keep paying through tough years.\n\nReliable income isn’t about how much you’re paid this year.\n\nIt’s about how long that payment can last.\n\nIf you want to retire with a constant stream of dividends, these 5 stocks might be all you need. We’ve found 5 SG stocks that have kept paying (and growing) through inflation, rate hikes, and recessions. See what they are with our latest free report for SGX dividend investors. Click here to get instant access.\n\nFollow us on Facebook, Instagram and Telegram for the latest investing news and analyses!\n\nDisclosure: Alex does not own any of the shares mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.35.12","shortVersion":"4.35.12","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2583668412","isCrawlerRequest":true}