Is This 10% Yield Due for a Cut?

Earlier this month, we saw high-yielding dividend stock Medical Facilities Corporation (TSX:DR) drastically slash its dividend payments after the company noted its payout ratio was well in excess of 100% and felt that a lower payout was more appropriate.

It’s a risk that investors always take with high-yielding stocks and that’s where it can be dangerous because if a reduction happens, you could be left holding a bag you didn’t really want in the first place.

Another dividend stock that could be at risk is American Hotel Income Properties (TSX:HOT.UN). Currently yielding 10% per year, it’s one of the higher dividend stocks out there. And while it could be enticing at that high of a rate, it’s also a bit risky as well.

Not only did the company’s most recent earnings report see profits fall from the prior year, but American Hotel hasn’t consistently posted a profit to begin with.

With the economy potentially heading into some tougher times, the tourism industry could be one that gets hit particularly hard, and that could make American Hotel even more vulnerable.

Throw in a dividend cut and it could be a complete disaster heading its way. Over the past two years, the stock has lost nearly one-third of its value and it’s unlikely that a turnaround will happen anytime soon.

Given the risks facing American Hotel, it could be due for a cut to its dividend, especially if it needs to tighten up its financials and free up some cash flow for what could be a rough ride ahead.