Dividend Cut Alert: High Yield Dividend Growers Getting Too Risky

When High Yield Turns into High Risk

Every investor loves a fat dividend check. It’s the warm, fuzzy hug from your portfolio that says, “You made a good choice.” But what happens when that comforting check gets slashed in half—or disappears entirely? Welcome to the nightmare scenario of chasing high-yield dividend growers that were too good to be true.

In 2025, more and more high-yield companies are finding themselves on the edge of financial cliffs. From rising interest rates to plummeting free cash flows, the red flags are waving and too many investors are hitting snooze. But make no mistake: dividend cuts aren’t just possible—they’re already happening.

In this blog, we’re diving deep into:

Why high yield can be a flashing red warning light
The growing list of companies at risk
Real-world examples of recent dividend cuts
A framework for avoiding landmines and securing reliable income
Safer high-yield alternatives still worth owning

Because while income is great, income that vanishes is not.

1. The Seduction—and Danger—of High Yield

Let’s set the stage. In a world where savings accounts flirt with 5% APYs and T-bills are suddenly sexy again, why are investors still chasing stocks with 6%, 8%, or even 12% yields?

Simple: greed. Or more diplomatically—the search for passive income with upside potential.

But here’s the problem: high yield often isn’t a reward. It’s a signal of distress.

The Big Three Red Flags:

Unsustainable Payout Ratios
If a company is paying out more than 80% of its earnings—or worse, more than 100%—you’ve got a dividend house of cards.
Negative Free Cash Flow
Dividends don’t get paid from accounting profits. They get paid with cash. If FCF is negative, that dividend is walking a tightrope with no net.
Rising Debt and Falling Coverage Ratios
Companies that borrow to pay dividends are not investor-friendly—they’re desperate. Especially in an era of higher rates, refinancing becomes a chokehold.

2. Dividend Cut Casualties: 2025’s Growing List of Losers

Now let’s name names. Because several beloved dividend growers are already biting the dust or flirting with disaster.

🛑 Krispy Kreme (DNUT)

In May 2025, Krispy Kreme did what many investors feared—it suspended its dividend entirely. After weak earnings, flatlining growth, and increased input costs (yes, even donuts aren’t inflation-proof), the sugar rush is over.

🛑 Sabine Royalty Trust (SBR)

Oil price volatility combined with reduced production forced a brutal 35% cut in May. And since SBR is a trust that passes through variable income, they don’t have the luxury of smoothing things over.

🛑 Citizens Financial Group (CFG)

Regional banks have had it rough. After capital requirements increased and deposit costs spiked, CFG opted to cut its dividend by 22% in Q2 2025. The stock tanked 18% in a week.

🛑 Whirlpool (WHR)

Once a dividend darling of the Midwest, Whirlpool is now under pressure. With revenues stagnant and margins shrinking, WHR is expected to announce either a cut or a "freeze and review" by year-end.

3. When Dividend Growth Becomes a Trap

Here’s the thing: just because a company has grown its dividend doesn’t mean it should have.

The Walgreens Lesson (WBA)

Walgreens had a multi-decade dividend growth streak—until January 2024, when it froze the payout. In 2025, it's now widely expected to cut. The market already knows. The stock is down over 50% from its 2021 high, and with declining earnings, cost overruns, and store closures, it’s a textbook example of “dividend growth masking business decay.”

Diversified Energy Company (DEC)

In early 2025, this UK/US oil and gas company slashed its dividend by 40%. The reason? High interest expense, hedging losses, and a weak gas market. But the writing had been on the wall since 2023—rising leverage and shrinking margins were obvious to anyone paying attention.

4. Why Analysts Are Ringing the Alarm Bells

The warning signs aren’t coming from tinfoil-hat bloggers. Even mainstream analysts are hitting the brakes.

Barron’s: “Quintile 5 Is a Yield Trap”

In a recent cover story, Barron’s analyzed dividend-paying stocks by quintile. The highest-yielding 20%—Quintile 5—had the worst historical returns and the highest rate of dividend cuts. Meanwhile, companies in Quintile 2 (modest yields, solid coverage) performed best.

Credit Suisse: “Reevaluate Before the Next Shoe Drops”

Credit Suisse issued a warning in April 2025 urging income investors to focus on companies with:

Debt/EBITDA under 3.0x
FCF/dividend coverage of 1.5x or more
Minimal exposure to cyclical revenue

Their conclusion? “Yield without sustainability is a mirage.”

5. Safer High-Yield Dividend Growers Still Standing

Not everything in dividend land is on fire. There are still quality companies offering reasonable yields with solid growth profiles.

✅ UGI Corporation (UGI)

Yield: 4.1%
Dividend Growth: 37 consecutive years
Debt manageable, diversified utility and midstream exposure
UGI has weathered inflation, interest rate hikes, and commodity volatility. It’s boring—but in a good way.

✅ EPR Properties (EPR)

Yield: 6.7%
Focus: Entertainment and experiential REIT
Dividend recently raised, with strong occupancy rates
EPR was hit hard during COVID but has rebounded sharply. Their recent hike signals confidence in future cash flows.

✅ Clearway Energy (CWEN)

Yield: 6.0%
Focus: Renewable energy assets
Dividend growth target: 5-8% CAGR
As a utility with contracted revenue streams, Clearway offers inflation-resistant payouts backed by long-term agreements.

6. Building a Smarter Dividend Portfolio

You don’t have to give up yield to stay safe. But you do need a framework.

7. Case Study: Three Portfolio Approaches

Let’s imagine three portfolios, each with $100,000 invested in different dividend strategies.

Portfolio A: The High-Yield Trap

Top Holdings: SBR, WHR, CFG, ZIM
Yield: 8.5%
1-Year Return: -23%
Dividend Cuts: 3 out of 4 stocks
Lesson: Chasing unsustainable yields leads to capital destruction and unreliable income.

Portfolio B: Balanced Income

Top Holdings: UGI, EPR, CWEN, 3M
Yield: 4.8%
1-Year Return: +5%
Dividend Cuts: 0
Lesson: Slightly lower yield but solid total return and income reliability.

Portfolio C: Defensive Dividend Growers

Top Holdings: JNJ, ADP, NEE, PEP
Yield: 2.9%
1-Year Return: +8%
Dividend Growth: 6-10% CAGR
Lesson: Best total return, modest yield, high safety. Great for long-term investors.

8. What to Do When a Dividend Gets Cut

You bought the stock. You believed in the story. Then—bam—the dividend gets slashed. What now?

First, don’t panic sell—yet.

Ask yourself:

Is the business still viable?
Was the dividend cut to preserve cash for growth?
Are they signaling a reinstatement later?

Then decide: Reassess or Redeploy

Reassess: If the company still has long-term potential, maybe stick it out. Think of it like a reset.
Redeploy: If the cut exposes deeper issues—bad management, poor capital allocation—then sell and reinvest in stronger names.

9. Tools to Stay Ahead of Cuts

Here’s how smart investors monitor their dividend exposure:

Track Payout Ratios Quarterly using sites like Seeking Alpha or Simply Safe Dividends
Watch Earnings Reports Closely, especially the cash flow statements
Set Alerts for News: A slowdown in dividend growth often comes before a cut
Diversify Across Sectors: Avoid putting all your yield in one industry (looking at you, energy)

10. Final Thoughts: Yield Is Not a Free Lunch

In a world awash in dividend “opportunities,” it’s tempting to grab the fattest yield you can find and call it a day. But we’ve seen what happens when you don’t do the homework.

Sabine Royalty cut.
Krispy Kreme suspended.
Citizens got hit.
Walgreens froze—and might cut next.

That’s real money gone.

The smarter play? Accept modest yield from quality businesses. Mix in a few higher-yield names with strong fundamentals. And always, always watch the red flags.

Because when a dividend disappears, so does your peace of mind.

Key Takeaways:

✅ High yield often = high risk
✅ Use a checklist to evaluate dividend safety
✅ Watch for deteriorating FCF, payout ratios, debt levels
✅ Diversify income streams
✅ Don’t be afraid to walk away from a broken story

If you're serious about income investing, be serious about quality. Because the only thing worse than a dividend cut… is not seeing it coming.

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