With so many top-tier dividend shares to select from on the TSX, I focus most of my time and a spotlight on discovering the very best choose for buyers. That stated, there’s additionally the inverse, which may be true: with so many high high-yielding choices to select from, some could not have the ability to proceed to pay out their excessive dividend yields over time.
One firm I’m rising more and more bearish on on this regard is Yellow Pages (TSX:Y).
Right here’s why I believe Yellow Pages might be a high dividend inventory for buyers to keep away from proper now.
Supply: Getty Photographs
Income decline spells bother
I believe the important thing catalyst that determines numerous an organization’s upside potential has to do with its underlying fundamentals and relative development charges. Now, whereas Yellow Pages inventory has surged of late (see chart above), that’s as a consequence of extra exogenous components than elementary ones.
By way of income development from digital advertising and people fading print directories, issues are pointing within the incorrect course. Certainly, digital revenues, which make up 80% of the corporate’s gross sales, dropped 6.8% in Q1 2025 alone, whereas print cratered 10.5%. Over the previous 5 years, earnings per share have plunged 23% yearly, with no reversal in sight.
Now, the corporate’s administration group is speaking a very good recreation about “bending the income curve.” Nonetheless, buyer losses proceed to persist, and legacy print is a dying relic. In a world of Google adverts and AI-driven advertising, Yellow Pages is swimming upstream in opposition to giants. Any whiff of financial slowdown may speed up the bleed, turning that yield into idiot’s gold.
Dividend sustainability might be known as into query
The opposite key driver of uncertainty shifting ahead is how Yellow Pages plans to fund its spectacular dividend yield above 7%. By way of the inventory’s payout ratio, there’s so much left to be desired in my books.
Final yr, Yellow Pages shelled out 102% of income as dividends. Any quantity over 100% is a screaming pink flag for a scarcity of long-term dividend protection. Now, free money flows may enhance (and the present distribution takes up round 50% of the corporate’s total working money circulation). But when margins deteriorate additional over time, this inventory is at critical threat of a dividend lower.
For these causes, and expectations that earnings per share may drop one other 23% within the yr to return, this can be a firm with too many headwinds to be thought of a viable funding for my part.
There are many different mid-single-digit yielding shares out there to select from with way more sturdy steadiness sheets. Thus, Yellow Pages seems to be like a textbook dividend lure, if I’ve ever seen one, proper now.
