Quick Read
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IEP's 38% yield masks a crisis: units down 75% in five years, two prior cuts, and 2025 operating cash flow negative $313 million.
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PSEC's own filings warn distributions exceed net investment income, and ARR's payout ran at 101% of distributable earnings last quarter.
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A dividend cut typically hits investors twice, as income drops and share price falls simultaneously. This is what makes coverage metrics essential before buying yield.
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Icahn Enterprises( NASDAQ:IEP ) units yield about 38.2% at a recent price of $5.23. Yields that high draw attention, but a payout is only as good as what the company can sustain. These six stocks offer attractive income, and each carries warning signs retirement-focused investors should watch closely.
A dividendlooks unsustainable when the right earnings measure, free cash flow, or the balance sheet can't fund it without taking on debt, selling assets, or issuing new shares. (We listed all seven of the warning signs that a big yield is about to be cut in a free report you can grab here.)
Kraft Heinz (KHC): Shrinking Sales Behind a Frozen Payout
Kraft Heinz( NASDAQ:KHC ) pays $1.60 a year, which works out to a 6.5% yield at $24.46. Shares are down 55.94% over ten years.
Second-quarter revenue slipped 1.4% to $6.26 billion, and a $7.4 billion impairment drove a net loss of $5.46 billion. With those results, management guided constant-currency adjusted operating income down 16% to 18% this year. The planned separation into two companies is on pause. Measured against that adjusted EPS guidance of $2.03 to $2.09, the dividend takes up 77% to 79% of earnings.
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Cash supports the bullish thesis. Operating cash flow of $4.46 billion minus $801 million of capex left $3.66 billion in 2025, well above the $1.9 billion paid out in dividends. Still, the board once cut the quarterly payout from $0.625 to $0.40 during an earlier stretch of earnings pressure.
ARMOUR Residential REIT (ARR): A 22% Yield Held Through a Book Value Hit
ARMOUR Residential REIT( NYSE:ARR ) is a mortgage REIT. It pays $0.24 a month, for a 22.5% yield. Shares are down 16.64% year-to-date. Mortgage REITs take on heavy debt to own mortgage bonds. So a modest move in spreads can do large damage to book value.
For mortgage REITs, the coverage measure that matters is distributable earnings, which came in at $0.71 per share in the third quarter. Three monthly payments total $0.72, so the payout ran at about 101% of that figure. Book value per share fell to $14.55 from $17.53, down about 17%, and leverage stands at 8.24:1. Over the same quarter, ARMOUR raised $205.7 million by selling stock at market. Holding a payout steady while issuing shares during stress is a red flag.
For the dividend to hold, spreads need to tighten, and book value needs to recover. Liquidity of $1.02 billion gives the company some time.
Prospect Capital (PSEC): A Payout Already Cut and a Shrinking NAV
Prospect Capital( NASDAQ:PSEC ) is a business development company (BDC) yielding 26.1% on $0.42 a year. A falling share price drives most of that yield, with the stock down 25.94% over the past year.
For BDCs, net investment income (NII) is the coverage measure that matters. NII fell to $0.15 per share from $0.17 a year earlier, and the fiscal-year filing warned that "distributions to common shareholders exceed net investment income." Prospect already cut the monthly payout to $0.035 from $0.045. NAV per share fell to $5.71 from $6.56, and non-accruals rose to 0.7% of assets from 0.3%. A $264.5 million bond comes due in November 2026.
At the lower rate, the quarterly payout equals about 70% of June-quarter NII. The $328 million Valley Electric sale also helps. Whether that buffer lasts depends on credit losses settling down.
Icahn Enterprises (IEP): A Partnership Payout Funded by New Units
Icahn Enterprises is a master limited partnership that pays $0.50 per unit each quarter. Units have fallen 74.84% over five years, and the distribution has already been cut twice: from $2 to $1, then to $0.50.
For a holding partnership, the measures that matter are distributable cash and NAV. NAV fell by $765 million in one quarter to about $2.60 billion. Adjusted EBITDA attributable to IEP swung to negative $134 million. In 2025, operating cash flow was-$313 million, while cash distributions were $288 million. Unitholders get paid in additional units unless they choose cash, which saves the partnership's cash but dilutes existing holders.
The $700 million Pep Boys sale should add liquidity. Management has said part of the proceeds may go toward the 2027 notes maturities.
British American Tobacco (BTI): Cash Flow Barely Covering the Payout
British American Tobacco( NYSE:BTI ) yields 5.4%. Shares rose 26.48% in a year, so price weakness isn't what's driving the yield.
Free cash flow coverage is where the strain shows. For the period ending June 2026, operating cash flow of £2.60 billion came in slightly below the £2.65 billion paid in dividends. Full-year 2025 free cash flow of £5.79 billion covered £5.12 billion in dividends. But operating cash flow had fallen from £10.1 billion the year before. BAT also faces combustible volume declines, regulatory examination, and a heavy debt load, and U.S. holders take on currency risk because the ADR dividend is converted into dollars.
On the other side, BAT has a long dividend record and growing New Categories products.
MarketWise (MKTW): The Headline Yield Overstates the Regular Dividend
MarketWise( NASDAQ:MKTW ) targets $1.80 a year in dividends, a 9.0% yield. Starting in the third quarter, only $0.25 of each $0.45 payment counts as the regular dividend. On that regular portion alone, the yield is about 5.0%.
Second-quarter GAAP results showed a loss of $0.24 per share, missing expectations of $0.65. Revenue fell 5.2%. Stockholders' equity is negative $267.27 million, cash fell to $32.9 million from $53 million, and the company disclosed material weaknesses in internal controls.
Free cash flow of $21.4 million and billings growth of 56.7% keep the payout funded for now.
Why Yield Alone Is Never the Thesis
A dividend cut usually pulls the share price down with it, so income investors take two hits at once. Before buying for yield, check the payout against the coverage measure that fits the business, check free cash flow, and check the balance sheet. A yield is only as reliable as the cash behind it.
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