The Dividend Yield Sword: Attracting Investors with Cash but Warning of Business Weakness?
High dividend yields are a double-edged sword. On the one hand, you can get a sizable amount of cash back from these investments each year. On the other hand, a high dividend yield is indicative of business weakness, which may lead to poor stock price performance and a potential cutting of the dividend in future years. One of the few large stocks approaching a dividend yield of 8% is British American Tobacco (NYSE: BTI), dealing with sector headwinds and business missteps.
- The allure of high dividends can be intoxicating, but investors need to carefully consider whether the promised payouts are sustainable in the face of declining customer volumes and revenue.
- As British American Tobacco transitions to a new nicotine products-driven growth strategy, will its dividend yield remain attractive to investors, or will it become a liability in the eyes of shareholders?