Updated: May 13, 2016
There are a growing number of stocks and funds yielding over 12%, luring in unsuspecting investors. Earning $12 in income for every $100 invested sounds great – unfortunately, it’s often too good to be true.
Generally, stocks have outsized yields when the market thinks that their income source is threatened. When that happens, a dividend cut ensues, turning the big dividend into a tiny one.
For example, ConocoPhillips (COP) was a blue chip with decades of dividend growth behind it and a handsome 4% dividend yield for much of the last five years. As energy prices declined along with Conoco’s stock price, its yield skyrocketed… until it slashed its dividend by over 66% at the beginning of this year.…