Big Dividends Mean Playing With Fire

As a beginning investor, I was fascinated with the concept of dividends. "Own a piece of the company, and get paid for it? Don't mind if I do!" I searched the Internet up and down looking for companies that were paying huge dividends. Things have changed for me since then, as I've refined my own personal investment strategy. I wouldn't be surprised, though, if several other beginning investors do the same thing -- endlessly search for big payouts.

Last month, I highlighted three extremely dangerous dividend stocks. As it turned out, one of them -- Radio Shack (NYSE: RSH) -- didn't even offer a dividend, but many popular finance sites were showing that it did. Another one of the stocks, Roundy's (NYSE: RNDY), just cut its dividend by a whopping 48%, sending the company's shares into a nosedive. The third culprit of this triumvirate was Windstream (Nasdaq: WIN), a domestic telecom company. Shares of this company are also down about 20% since early October.

Source: Motley Fool

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