When examining a stock's dividend yield you need to go behind the numbers. A fantastic dividend yield on the surface may be masking some significant underlying issues. The dividend yield is simply a calculation that compares the annual dividend distribution to the current price per share. The dividend yield can look artificially inflated if the stock price has taken a recent hit; that's why investors need to examine the fundamentals of the company first and look at the dividend yield later.
There are a number of companies out there with prodigious yields that for one reason or another - challenging economic conditions or poor company-specific performance - warrant caution. Chasing the dividend in any one of these stocks could end up leaving you with a loss on your investment: AT&T (T), Southern Company (SO) and Apollo Residential Mortgage (AMTG).
Source: Seeking Alpha
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