Dividend Investors Beware: 3 Yield Traps Masquerading as Bargains | Markets

High-yield stocks often catch the eye of investors due to the seemingly significant, tangible returns on investment. Yet, not all that glitters is gold. In fact, it’s often the case that many names offering outsized yields are attached to a number of risks. Some mask such lurking risks beneath their attractive yields, these are known as dividend yield traps.

A yield trap occurs when a stock’s dividend appears enticingly high, often above the industry average or historical norms. Yet, what one can initially perceive as generosity can often be misleading, as it might stem from factors such as a declining stock price or unsustainable payout ratios rather than a high-payout business with healthy financials.

In my early investing journey, I found myself falling into yield traps. Over the years, I have seen both novice and seasoned investors alike often make the same mistake. Below, I share three dividend yield traps whose high yields should be approached with caution.

Leggett & Platt (LEG)

Source: Casimiro PT / Shutterstock.com

For some, it may be a bit surprising that I am including Leggett & Platt (NYSE:LEG) as a possible yield trap. This is because income-oriented investors hold this old furniture and bedding manufacturer in high regard. Having grown its…

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