Core Viewpoint - Dividend stocks may not be the safe-haven investors believe them to be, as many may be classified as "False Dividend Stocks" that pay dividends without sufficient cash flow to sustain them [3][4]. Group 1: False Dividend Stocks - False Dividend Stocks pay dividends but lack the cash flow to support these payments, leading to a high risk of dividend cuts and stock price declines [4][5]. - Successful dividend investing requires identifying companies that can sustain and grow their dividends, rather than just those that pay them [5]. Group 2: Market Analysis - Out of approximately 3,300 stocks under coverage, 1,416 (43%) pay dividends, but only 44 (1%) qualify as "Good Dividend Stocks" [7]. - There are 344 dividend-paying stocks with negative free cash flow (FCF) in the trailing twelve months (TTM) as of June 4, 2025 [9]. Group 3: Specific False Dividend Stocks - CTO Realty Growth (CTO) has a dividend yield of 8.3% but reported -$189 million in FCF for the TTM, with a cumulative dividend deficit of -$661 million from 2020 to Q1 2025 [13][14]. - The AES Corp (AES) has a dividend yield of 6.9% and a negative FCF of -$719 million for the TTM, with a cumulative dividend deficit of -$11.5 billion over the last five years [16][17]. - Edison International (EIX) has a dividend yield of 5.9% and burned $1.1 billion in FCF for the TTM, with a cumulative dividend deficit of -$12.1 billion from 2020 to Q1 2025 [20][21].
Red Alert: Beware False Dividend Stocks