With interest rates at historic lows, retirees and other income investors are more likely than ever to fall into a dangerous trap -- chasing higher-risk dividend stocks to earn more income. This doesn't only occur among do-it-yourself investors. I've seen professionals succumb to this temptation, too. Sure, this strategy could get you more income. But what good does it do if you end up taking a massive hit to your principal? It's just the sort of thing that can muck up your retirement plans badly.
A prime example is oil and gas exploration and production (E&P) firm Enerplus Corp. (NYSE: ERF). This higher-risk dividend stock has become very popular because of its yield, which has averaged almost 11% during the past five years and is at almost 7%. If you'd bought the stock five years ago, then you'd have lost nearly 9% annually through Sep. 27, 2012 -- and that's with a dividend ranging from $1.10 to $4.75 a share during the same five-year period.
Source: Street Authority
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