Yield Traps – Why Chasing High Dividends Can Destroy You

It looks irresistible. A stock with a 12% dividend yield. But here’s the truth no one tells beginners:

High yield ≠ high quality. In fact, it often means the opposite.

What Is a Yield Trap?

A yield trap is when a dividend looks high because the stock price has collapsed — often due to:

• 🚨 Failing business models
• 📉 Deteriorating revenue or debt overload
• ⚠ Looming dividend cuts not yet announced

The Hidden Cost of “Too Good to Be True”

When that dividend is slashed, not only is your income gone — your capital is too. You’ve lost both streams.

AI Can Detect the Danger Before It’s Visible

AI tools can spot these traps by analyzing:

• 📊 Debt/equity ratios and interest coverage trends
• 📉 Dividend payout ratios vs free cash flow
• 📅 Frequency of dividend delays or changes in cadence

The Safe Yield Zone (And Why It Wins Long-Term)

History shows that companies with a yield between 2.5%–6% tend to have:

• ✅ More sustainable payout models
• ✅ Higher dividend growth rates
• ✅ Better total return over decades

Stop chasing 10% lies. Start building 6% truth — with AI as your radar.