Dividend stocks are naturally appealing for income investors, but not all dividend stocks are buys. Income investors generally want to avoid dividend cuts whenever possible. Not only does a dividend cut result in a loss of income, but a company’s share price typically declines after announcing a dividend reduction or suspension.

As a result, investors should avoid overly risky dividend stocks. The 3 dividend stocks in this article have high yields, which are attractive on the surface. But these 3 dividend payers are also facing significant challenges to their underlying businesses, which could one day result in a dividend cut.

Icahn Enterprises LP (IEP)

Through its subsidiaries, Icahn Enterprises L.P. operates in investment, energy, automotive, food packaging, metals, real estate and home fashion businesses in the United States and Internationally. The company's Investment segment focuses on finding undervalued companies to allocate capital through its various private investment funds.

Significant positions include FirstEnergy Corporation (FE), Xerox Corporation (XRX), Herc Holdings, Inc. (HRI), Newell Brands, Inc. (NWL), and Southwest Gas Holdings, Inc. (SWX). Some of its positions ultimately result in control or complete ownership of the target company.

Carl Icahn owns 100% of Icahn Enterprises GP, the general partner of Icahn Enterprises and Icahn Enterprises Holdings, and approximately 90% of Icahn Enterprises' outstanding shares.

IEP does not have a strong history of consistent dividends. On November 8th, 2024, the partnership halved its quarterly distribution to $0.50. This followed a separate 50% reduction the previous year.

While IEP has a tantalizingly high yield of 19%, the current annualized distribution of $2.00 per unit does not appear sustainable.

Icahn Enterprises is an unusual company. On the whole, this security remains considerably speculative from every angle.

Arbor Realty Trust (ABR)

Arbor Realty Trust is a nationwide mortgage real estate investment trust (REIT) that acts as a direct lender and operates in two reporting segments: Agency Business and Structured Business. The trust provides loan origination and servicing for multifamily, seniors housing, healthcare, and other diverse commercial real estate assets.

Arbor Realty’s specific focus is government-sponsored enterprise products, although its platform also includes commercial mortgage-backed securities (CMBS), bridge and mezzanine loans, and preferred equity issuances.

In the 2024 fourth quarter, Arbor’s distributable earnings of $0.40 per share, down 21% year-over-year. Distributable earnings are now below the quarterly dividend of $0.43 per share.

Arbor Realty has had to issue a lot of additional common shares to fuel its growth over the past decade, thereby diluting bottom line returns for shareholders. Moving forward, we expect the trust’s investments to be offset by a weakening real estate and macroeconomic picture as well as dilution to some degree by significant share issuances.

As a company continues to issue shares, it becomes more expensive to maintain the dividend payout. Arbor Realty continues to maintain its quarterly dividend payout of $0.43 per share, or $1.72 per share annually. This represents a high current yield of 14%, but yields this high should generally be viewed with caution.

B&G Foods (BGS)

B&G Foods, Inc. is a consumer staples company with operations in the U.S., Canada, and Puerto Rico. Some of the company’s well-known brands include Green Giant, Cream of Wheat, Cary’s, Ortega, Mrs. Dash, and Maple Grove Farms, with 50+ brands in total.

Its product portfolio focuses on shelf-stable, frozen and snack brands. On December 1st, 2020, B&G Foods completed the acquisition of Crisco.

The stock has a very high dividend yield above 11%, but the dividend payout could be at risk.

The company’s business model has largely been to take on debt and acquire brands, then scale them and utilize price increases. This strategy worked for a time, but the company’s revenue and earnings have stagnated for several years.

For example, EPS hit a peak of $2.26 in 2020 as the company saw a pandemic-related boost as consumers ate more at home. But EPS has steadily fallen since, to $0.99 per share in 2023. Analysts expect EPS to continue falling in 2025 to $0.67 per share, making it highly difficult for the company to maintain the current dividend payout.

Meanwhile, the balance sheet is bloated with debt. At the end of the third quarter, BGS had long-term debt of $1.81 billion, compared with just $54.7 million in cash and cash equivalents.

Meanwhile, interest expense for the third quarter was $42.1 million, up 17.5% from the same quarter the previous year. Interest expense accounted for 82% of the company's operating income for the third quarter.

As interest expense continues to take more of the company’s operating income, there is only so much cash to go around. It seems unlikely the company will continue to pay such a high dividend, when it needs to prioritize cash flow for investments in its brand portfolio, and debt reduction.

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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul