Media stories about high-dividend stocks can be dangerously simplistic. They focus on headline yield, overlooking future dividend growth, company valuation and risk.
Or the stories neglect that the stock’s yield is inflated by its falling share price, which in turn reflects market fears that the dividend will be cut or the company is poor quality.
As I have written before in this column, conservative, income-seeking investors should get yield from managed funds. Why buy a stock purely for a 5% yield and take on single-company risk when you get a similar return (after fees) from a diversified portfolio of stocks and benefit from professional management?