If you’re like me, when you see an outsized dividend yield, you stop for a second and immediately do the mental math. How much would we get back in payouts from, say, a 9.3% payer if we were to invest $10,000? Or $20,000? Or $100,000?
But savvy contrarians we are, we know to push back on this initial reaction and look deeper. Because (as we contrarians know), those big yields can (and usually are) a danger sign.
Truth is, a rising dividend is only one possible reason for a high payout. In fact, it’s the least likely one.
This post originally appeared at Contrarian Outlook.