In an era when the average S&P 500 company pays less than two percent, you’d think that it would be difficult to find dividend yields of close to 10%. But that’s not really the case. Even in a low-interest-rate, subdued-dividend-yield environment, it’s still possible to find stocks with double-digit payouts. The problem lies in their dividend safety or, rather, the lack of it...
Think about it: if a company offers a huge payout that’s also safe, investors would rush toward it and bid up its price. Due to the inverse relationship between dividend yield and stock price, high investor enthusiasm would eventually bring its yield down to a normal level. That’s why most ultra-high yielders are not really suitable for conservative income investors. And that’s also the reason why PennantPark Investment Corp. (NASDAQ:PNNT) deserves your attention.
Source: Income Investors
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