Quick Read
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Prospect Capital cut its payout twice to $0.035/month; Polaris's earnings only cover its dividend by counting $0.96 in one-time tariff refunds.
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Kohl's already slashed its dividend 75% in 2025, while Harley-Davidson cut 95% in 2020, proving high yields can collapse without warning.
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Hormel's GAAP EPS guidance of roughly $1.09 falls below its $1.17 annual dividend, pushing the payout ratio above 100% for fiscal 2026.
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A big yield only matters if the company can keep paying it. Shares of Prospect Capital( NASDAQ:PSEC ) have fallen 30.38% over the past year, which drives its annualized distribution to a yield of roughly 25.9%. A number like that usually signals stress, and buyers shouldn't read it as a reward. The screen for this list started with payout coverage and free cash flow, then checked whether a falling share price was doing the work of expanding the yield.
Quick test you can run yourself:a dividend becomes unsustainable when earnings (measured the right way for the business model) and free cash flow stop covering it, and debt, asset sales, or one-time gains start filling the gap.
Prospect Capital (PSEC): A Yield Built on a Falling Price
Prospect pays $0.035 per month, or $0.42 annualized. The stock price is driving that yield, because the payout has been shrinking. Shares are down 25.15% in the past month alone and 61.21% over five years.
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Prospect is a business development company (BDC), so EPS is the wrong metric. The right one is net investment income (NII), and that fell to $0.15 per share from $0.17. That still stands above the $0.105 quarterly distribution. But the company's own risk disclosure warns that distributions to common shareholders exceed net investment income. Net asset value per share fell from $6.56 to $5.71. Non-accrual loans rose to 0.7% of total assets from 0.3%, and net realized losses reached $223.7 million for the fiscal year. The payout has already been cut twice, from $0.06 to $0.045 and then to $0.035 starting in May 2026.
In Prospect's favor, leverage is moderate. It sits at 28.6% net debt to total assets, and first-lien loans now make up 72.5% of the portfolio at cost. Here is what to check: 76% of its interest-bearing assets are floating rate, so falling rates drives NII toward the distribution. The company also has a $264.5 million bond maturity due in November 2026.
Hormel Foods (HRL): GAAP Earnings No Longer Cover the Check
Hormel Foods( NYSE:HRL ) pays $1.17 a year, a yield of about 5.8%. The quarterly payout barely moved, from $0.29 to $0.2925, while shares fell 43.8% over five years. Most of the yield's rise is due to the falling share price.
Hormel cut its fiscal 2026 GAAP EPS guidance to $1.06 to $1.12, which is below the dividend. That puts the GAAP payout ratio at roughly 104% to 110%. Free cash flow tells the same story: fiscal 2025 operating cash flow minus capex came to $534.3 million, short of the $633.2 million paid in dividends. Revenue fell 2.4%, and sales guidance was cut to $12.1 to $12.2 billion.
Management is standing firm. "We remain committed to the dividend and are proud to have reached our 392nd consecutive quarterly payout." Adjusted EPS guidance of $1.45 to $1.51 still covers the payout, and cash stands at $840 million. The payout comes under real pressure if adjusted earnings slip toward $1.17.
Polaris (PII): Strip Out Tariff Refunds and the Math Breaks
Polaris( NYSE:PII ) pays $2.72 annualized, a yield near 5.4%. Shares are down 24.51% over the past year, which expanding that yield.
Trailing diluted EPS came in at -$4.61. The raised fiscal 2026 adjusted EPS guide of $3.00 to $3.10 includes about $0.96 from one-time tariff refunds. Strip those out and you get $2.04 to $2.14, below the dividend. Shareholders' equity also fell 29.4% to $836.5 million.
Revenue rose 9.2% to $2.02 billion, and powersports sales grew 17%. The verifiable risk is whether earnings excluding refunds climb back above the dividend once the refunds are gone.
Harley-Davidson (HOG): A Covered Payout on a Shrinking Business
Harley-Davidson( NYSE:HOG ) yields about 2.75% on a $0.1875 quarterly payout, which is roughly 41% of trailing EPS of $1.82. The yield is low, so the history is the warning: in 2020 the quarterly dividend fell from $0.38 to $0.02.
Today the payout is covered, but the business behind it is shrinking. Revenue fell 5.9%, operating income dropped 32.4%, and net income declined 25.8%. LiveWire is still guided to lose $70 million to $80 million. A demand shock would put the payout under pressure, because the core motorcycle unit's guided operating income is just $10 million to $50 million.
Kohl's (KSS): What a Trap Looks Like After It Closes
Kohl's( NYSE:KSS ) now yields about 2.37%. Investors who chased its old payout took a 75% cut, from $0.50 to $0.125 per quarter, in 2025.
The reduced dividend costs about $14 million a quarter, against Q2 operating cash flow of $552 million, so coverage is comfortable. Even so, the Q2 EPS of $1.28 got a lift from about $100 million in tariff refunds. Full-year guidance includes roughly 65 cents of that benefit, while comparable sales fell 0.9%. Keep an eye on whether comps stabilize once the refunds stop.
What to Watch Before Reaching for Yield
A dividend cut usually pulls the share price down with it, so income investors will lose twice. Track NII at Prospect, GAAP earnings and free cash flow at Hormel, and earnings without refunds at Polaris. On its own, a high yield doesn't make a stock worth buying. (We laid out the seven signs a big payout may be about to be cut in a free dividend trap guide, which pairs well with the checks above.)
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