Are High-Yield Dividend Stocks Worth the Risk?

Dividends of 8%, 10%, or more offered by companies like mortgage REITs and business development companies, or BDCs, sure can be tempting. However, are they worth the risk? We asked three of our analysts what they think about investing in high-paying stocks, and here is what they had to say. Matt Frankel: It depends which high-dividend stocks we're talking about, as well as your personal goals or risk tolerance. For example, mortgage REITs come with double-digit yields, but also have tremendous risk related to interest rates and other variables.

Patrick Morris: I couldn't agree more with Matt, as I too think the answer is, "it depends." A company like New York Community Bancorp (NYSE: NYCB ) doesn't carry a double-digit yield. But I would still consider it as high-yield because it pays a dividend yield above 6%. Jordan Wathen: Investors should seek to do the opposite of what the crowd is doing. With rates low, investors are chasing yield in everything from junk bonds to dividend stocks. If you don't need income, you can probably find better-priced stocks, and thus better-priced risks, elsewhere in the market.

Source: Motley Fool

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