Buying stocks with big dividend yields can be a smart way to generate a stable flow of passive income. But if a stock's yield looks too good to be true, it might be unsustainable. One way to get a bead on whether a company's dividend is sustainable is to check its payout ratio.
Generally speaking, weak earnings and FCF growth and payout ratios exceeding 100% indicate that a company's dividend could be slashed in the near future. Let's take a look at two companies which fit that profile -- Vector Group (NYSE:VGR) and Frontier Communications (NASDAQ:FTR).
Source: Motley Fool
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