Why Chasing High Dividend Yields Destroys Wealth

It’s one of the oldest mistakes in investing: confusing high dividend yield with quality. The truth? Most high-yield stocks are traps—financially unstable, unsustainable, and often moments from a dividend cut.

The High-Yield Illusion

When a stock shows a 9% yield, it feels like a shortcut to passive income. But ask yourself: Why is the yield that high?

• 📉 The price may have dropped drastically due to underlying risks.
• 🧨 The dividend may be on the edge of being cut.
• 🪫 The business model may be deteriorating.

Dividend Safety Over Yield

Seasoned investors care more about dividend safety than short-term returns. They track payout ratios, free cash flow trends, and business sustainability—not just yield percentages.

Dividends should be a reward for owning healthy, growing businesses—not desperate payouts from failing companies.

The Dividend Growth Formula

Instead of chasing yield, aim for:

• ✅ 10+ year dividend growth track records
• ✅ Low payout ratios (under 60%)
• ✅ Strong earnings momentum
• ✅ Sectors with long-term economic tailwinds

Growth > Yield. Longevity > Emotion. Systems > Guesswork.