This article will look at the top dividend trap stocks you should avoid in 2025.
During uncertain times, dividend stocks are often seen as a safe bet for investors to cushion the impact. In 2025, however, the cushion may be carrying more risk than reward. Shifting market conditions are revealing signs of trouble underneath the stocks, which were initially appreciated as reliable dividend payers. No, we are not talking just about volatility or short-term noise; we are talking about companies that would seem irresistible with their attractive yield but carry risks capable of eroding your capital.
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A thick fog of uncertainty rests over the investing climate in 2025. Earnings expectations for the large caps have been slashed at an alarming rate in the past few weeks alone. CNBC noted that some of the analysts, who initially predicted a 5% earnings growth for the market indices, have revised their estimation to a flat or even negative outcome by next month. Various companies have pulled their guidance together, reflecting not just caution but an absence of visibility to make the forecast. And by extension, the dividend-paying stocks have become trickier than before.
What’s the cause? The U.S. tariffs. President Trump, though, announced a 90-day tariff-pause on dozens of countries, slapped a whopping 145% tariff on Chinese goods into the U.S. China retaliated with a 125% tariff on U.S. imports, effectively sealing off a $650 billion trading corridor, which was considered a lifeline of multiple industries both in the U.S. and China. According to Reuters, this trade war between two of the largest economies in the world has sent ripples across the already shaken global asset markets. Companies, including the consistent dividend payers, are now facing cost shocks and a sharp decline in their profit margin, which are bound to affect the income of the investors.
Shifts in investor sentiment are also becoming part of these challenges. Along with institutional investors, retail investors are also adopting a wait-and-see approach. Mergers and acquisitions processes are slowing down, capital expenditures are being slashed, and supply chains are being restructured to handle the current market issues rather than the long-term challenges. Recent earnings calls are showing the CFOs prioritizing liquidity and short-term cost optimization. These actions are highly likely to affect the dividends, as it is one of the easiest budget line items to slash.
The situation underscores the importance of not blindly chasing after yields. High dividend yields could potentially be masking a weakness, including earnings fall, escalating debt, or unsustainable payout ratios. In this regard, attractive yields are becoming a trap that can lure investors, only to collapse under pressure when market conditions worsen. With uncertainty outweighing opportunity in 2025, it is immensely necessary to separate solid dividend plays from ticking time bombs.
So, before you decide to incorporate an appealing dividend stock into your portfolio, take a close look at the picks in our article. Stay with us as we count down the 10 dividend trap stocks to avoid in 2025.
A close-up of a laptop monitor with stock market prices scrolling up and down.
Our Methodology
When putting together our list of top 10 dividend trap stocks to avoid, we have followed a few criteria. Primarily, we have set the minimum market cap at $2 billion since investors are less likely to fall for stocks with a smaller cap. The stocks that are on a declining trend have been considered for this article. Such low performance reflects issues within the business operations that have made an impact on the value of the stocks. Also, we have included only those stocks with a dividend yield of 5% or more to ensure that these stocks are attractive enough to lure investors. All our picks have a payout ratio of 100% or more, suggesting an earnings issue within the company, which the investors need to be aware of.
All the data used in the article were taken from financial databases and analyst reports, with all information updated as of April 11, 2025. Our picks are ranked based on their dividend yield.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Stanley Black & Decker, Inc. (NYSE:SWK)
Performance: -36.77%
Dividend Yield: 5.22%
Payout Ratio: 172.49%
A Connecticut-based company, Stanley Black & Decker, Inc. (NYSE:SWK) is a leading manufacturer of hand tools, power tools, and industrial solutions. The company’s product portfolio includes brands such as DeWalt, Craftsman, and Stanley. Its customer base is comprised of both professional and non-professional consumers globally. Stanley Black & Decker, Inc. (NYSE:SWK) derives its market strength from brand equity and innovation in battery and smart tool technologies, which are used to gain a position in the sector against other leading competitors.
The annual decline of 36.77% in the share price indicates that Stanley Black & Decker, Inc. (NYSE:SWK) has been losing its foothold in the industrial tools and household hardware market. Inversely, the consumer and DIY market environment has also been unfavorable, causing an impact on the overall demand for the company’s products. The divestiture of the infrastructure business, combined with the currency headwinds, additionally made a negative impact on the company’s revenue growth. The 2025 guidance anticipates a flat demand environment and an unmitigated impact of $100 million from risks induced by tariffs.
Stanley Black & Decker, Inc. (NYSE:SWK) supports its shareholders with a 5.22% dividend yield. But the dividends are outstripping the earnings with a high payout ratio of 172.49%. With such a high risk, the company earns a position among the worst dividend stocks.
9. ManpowerGroup Inc. (NYSE:MAN)
Performance: -29.41%
Dividend Yield: 5.90%
Payout Ratio: 102.33%
A global leader in workforce solutions, ManpowerGroup Inc. (NYSE:MAN) offers services including recruitment, talent development, and human capital consulting. Headquartered in Wisconsin, the company serves clients in over 75 countries, operating under multiple brands such as Manpower, Experis, and Talent Solutions. Using its digital transformation capabilities and labor market analytics, the company competes with Adecco and Randstad for market share. Strategic focus on skills-based placement supports relevance amid shifting global employment trends.
ManpowerGroup Inc. (NYSE:MAN)’s shares slipped by 29.41% over the last 12 months, indicating low performance in value creation. The company’s adjusted EBITDA went down by 12% in the fourth quarter, year-over-year. Increasing challenges in the European region notably contributed to this decline. Particularly, there was a 16% revenue decline in constant currency in Northern Europe. The company’s adjusted EPS also went down 27% year-over-year in constant currency. These decreases suggest a challenging financial environment for the company. The challenges are expected to persist throughout the first quarter of 2025, potentially reducing the revenue by 6% to 9%.
ManpowerGroup Inc. (NYSE:MAN) offers its shareholders a decent dividend yield of 5.90%. However, its payout ratio, standing at 102.33%, suggests earnings would not be able to cover the dividends, turning the stock into one of the worst dividend stocks for investors seeking reliability.
8. Vail Resorts, Inc. (NYSE:MTN)
Performance: -37.89%
Dividend Yield: 6.23%
Payout Ratio: 129.45%
Vail Resorts, Inc. (NYSE:MTN), headquartered in Colorado, operates mountain resorts and urban ski areas across North America and Australia. The company also manages a hospitality segment offering lodging, retail, and transportation services with a client base that includes recreational skiers and affluent tourists. It leverages its Epic Pass program and resort network to increase customer loyalty, thereby expanding revenue.
Shares of Vail Resorts, Inc. (NYSE:MTN) saw a downward trend in 2024, plummeting to 37.89% and raising concerns among investors and shareholders. Though there is revenue growth, the skier visits are declining. In the last two years, the skiers’ visits to the company’s resorts have declined 10.9% year-over-year. Vail Resorts, Inc. (NYSE:MTN) also reported a sluggish growth rate over the last five years. Since the recent two-year annualized revenue growth of 2.1% is even lower than the prevailing five-year trend, there is a high potential for deceleration, which would affect future revenue, particularly in 2025.
Vail Resorts, Inc. (NYSE:MTN) sports a 6.23% dividend yield. Though the yield is attractive, the payout ratio of 129.45% suggests a strain in the company’s financials. Signaling poor fiscal planning, these figures drag the company into the list of worst dividend performers for sustained income.
7. Alexandria Real Estate Equities, Inc. (NYSE:ARE)
Performance: -37.92%
Dividend Yield: 6.50%
Payout Ratio: 288.33%
Headquartered in California, Alexandria Real Estate Equities, Inc. (NYSE:ARE) carries on the business of a real estate investment trust (REIT). The company’s focus is on owning, operating, and developing life science and technology campuses. Their clients include biotech, pharmaceutical, and academic research institutions. The company concentrates on high-demand innovation clusters like Cambridge and San Diego to gain a competitive advantage. With strategic partnerships and long-term leases, the company has a strong foothold in mission-critical laboratories and research infrastructure.
Alexandria Real Estate Equities, Inc. (NYSE:ARE)’s performance during the past 1 year has declined by 37.92%. It suggests challenges in creating shareholder value. Primarily, the California wildfire has made a strong impact on the company’s teams and operations. Additionally, the macroeconomic conditions and high interest rates are causing the leasing activity in the biotech sector to slow down considerably. Alexandria Real Estate Equities, Inc. (NYSE:ARE) also anticipates flat growth for its same property NOI in 2025 because of upcoming leasing expiration and vacancies, while the non-revenue enhancing expenditures are expected to grow further due to repositioning activities.
The dividend yield of the company stands at 6.50%, which is enough to attract investors. However, Alexandria Real Estate Equities, Inc. (NYSE:ARE) backs this yield with a payout ratio of 288.33%, suggesting the involvement of high debt risk, thereby earning its place among the worst dividend stocks.
6. UWM Holdings Corporation (NYSE:UWMC)
Performance: -31.50%
Dividend Yield: 7.23%
Payout Ratio: 307.69%
Operating as United Wholesale Mortgage, UWM Holdings Corporation (NYSE:UWMC) is among the largest wholesale mortgage lenders in the U.S. The focus of the company is on residential mortgage origination through independent brokers. By offering competitive loan products with an emphasis on technology-based underwriting and processing, the Michigan-based company contends with top competitors like loanDepot. The broker-focused partnerships and low-cost operational models further help the company to stand out among its peers.
The drop in share price by 31.50% in the 1-year period suggests that UWM Holdings Corporation (NYSE:UWMC)’s scalability and digital platform position are not highly effective in navigating interest rate fluctuations and housing market shifts. In addition to this, the earlier investments made on growth opportunities have caused the operating expenses for 2024 to surpass expectations. The company also faces the impact of the mortgage market decline, with home sales reaching their record low since 1995. With new tariff rates, the existing demand is expected to prevail throughout 2025, leading to some impact on the company’s revenue growth.
UWM Holdings Corporation (NYSE:UWMC)’s 7.23% dividend might attract income chasers, but the 307.69% payout ratio is likely to divert investors from this risky dividend stock because they are paying almost 3 times more than what they are earning.
5. HF Sinclair Corporation (NYSE:DINO)
Performance: -54.44%
Dividend Yield: 7.28%
Payout Ratio: 219.78%
A Texas-based company, HF Sinclair Corporation (NYSE:DINO) is a diversified energy company focused on refining, marketing, and producing lubricants and renewable fuels. The company has complex refineries and distribution networks across the U.S. and uses them to supply gasoline, diesel, and specialty products. HF Sinclair Corporation (NYSE:DINO) distinguishes itself from its competitors through strategic acquisitions and renewable fuel capacity. Their focus on sustainability initiatives helps with their long-term competitiveness in the sector.
HF Sinclair Corporation (NYSE:DINO)’s staggering 54.44% price drop over the past year suggests poor performance. Particularly, in the fourth quarter, the company reported a net loss of $214 million, attributable to shareholders. A significant contributor to the loss was the notable decline in the EBITDA of the refining segment. The fall in sales volume, in addition to the reduced refinery gross margins, caused the decline. Another segment that faced a fall during the period was the renewables segment. High-priced inventory drawdown heavily impacted the profitability of the segment. Uncertainty in the R&D environment alongside the new tariff rates is expected to drive the stocks further down in 2025.
HF Sinclair Corporation (NYSE:DINO) offers a generous dividend yield of 7.28%. A 219.78% payout ratio reveals unsustainable distributions. The company is paying double what it earns to shareholders, which brings it to our list of handpicked worst dividend stocks.
4. Franklin Resources, Inc. (NYSE:BEN)
Performance: -31.89%
Dividend Yield: 7.31%
Payout Ratio: 195.31%
Franklin Resources, Inc. (NYSE:BEN), also known as Franklin Templeton, is a global investment management firm. Running its operations from California, the company offers mutual funds, ETFs, and institutional asset management services, catering to retail investors, sovereign funds, and pension plans. The company competes with strong competitors like BlackRock and T. Rowe Price by differentiating itself through multi-boutique investment strategies. The company follows an acquisition strategy alongside diversification across asset classes to improve its growth.
Franklin Resources, Inc. (NYSE:BEN)’s performance declined by 31.89% in the last 1 year, leading to concerns among shareholders. In 2024, the company lost around $49 billion in outflows because of the investigation conducted on Western Asset Management, a part of Franklin Resources, Inc. (NYSE:BEN) by the DOJ, SEC, and CFTC. The higher tax rate, combined with a decline in operating income, has reduced the adjusted net income by 4% and the adjusted diluted EPS by 8%. The ongoing investigations and the resulting outflows at Western Asset Management together have exposed the financial performance of the company to uncertainty and potential volatility.
Despite offering a compelling 7.31% dividend yield, Franklin Resources, Inc. (NYSE:BEN) remains one of the worst dividend stocks because of the ballooning payout ratio of 195.31%, which raises questions regarding the company’s sustainability of returns.
3. The Wendy’s Company (NASDAQ:WEN)
Performance: -31.60%
Dividend Yield: 7.52%
Payout Ratio: 105.26%
With headquarters located in Ohio, the global fast-food restaurant chain The Wendy’s Company (NASDAQ:WEN) specializes in making and selling hamburgers, chicken sandwiches, and frozen desserts. The company operates through a mix of company-owned and franchised locations, serving consumers in North America and international markets. Notable competitors like McDonald’s and Burger King prevent market share concentration. However, The Wendy’s Company (NASDAQ:WEN) leverages brand loyalty, menu innovation, and digital ordering platforms to enhance customer engagement and sustain a large customer base.
Despite the support from their breakfast expansion and global franchising strategy, the company incurred a decline in its value by 31.60%. The Wendy’s Company (NASDAQ:WEN) has closed several restaurants that were underperforming in the last quarter of 2024. These closures are expected to reflect negatively on the 2025 sales growth. Investments in field operations and higher incentive compensation could potentially drive up the G&A expenses for 2025, thereby limiting the company’s net income. Above all, the company has reduced the dividend payment. To fund the growth investments, the reduced dividend payment increases the concern of the income-focused investors regarding the company’s financial stability in 2025.
The Wendy’s Company (NASDAQ:WEN)’s shareholders benefit from a 7.52% yield. However, the yield is backed by a 105.26% payout ratio, raising questions regarding the company’s sustainability and joining other worst dividend stocks investors must stay away from.
2. Dow Inc. (NYSE:DOW)
Performance: -51.37%
Dividend Yield: 9.93%
Payout Ratio: 178.34%
Dow Inc. (NYSE:DOW), a Michigan-based company, is a global leader in materials science, producing plastics, industrial chemicals, and specialty products for end markets such as packaging, construction, and automotive. Innovation in polyethylene and polyurethane and circular economy initiatives amounts to the company’s competitive edge. Additionally, Dow Inc. (NYSE:DOW) uses integrated production and R&D investment to address climate challenges and demand shifts, thereby differing from its competitors in the market.
The company’s stocks saw a huge decline of 51.37% over the last 1 year, indicating a heavy fall in performance. The pricing pressures prevailing in the market caused a 2% year-over-year net sales decrease. As per the Q4 results, the EBITDA remained almost as flat as the previous year. The global macroeconomic conditions are weak and stand against the company, thus causing it to announce a strategic review of select European assets. Upon realizing that the market dynamics are not in its favor, Dow Inc. (NYSE:DOW) postponed the maintenance turnaround at one of its ethylene crackers in Europe. The decision could potentially idle the asset, resulting in lifespan exhaustion without generating any returns.
Even with a high dividend yield of 9.93%, Dow Inc. (NYSE:DOW) might be a risky dividend stock investment because of a dangerous 178.34% payout ratio, which signals unsound fundamentals.
1. Sitio Royalties Corp. (NYSE:STR)
Performance: -37.47%
Dividend Yield: 10.05%
Payout Ratio: 306.12%
Based in Colorado, Sitio Royalties Corp. (NYSE:STR) acquires, owns, and manages mineral and royalty interests in oil and gas-producing regions across the U.S., primarily within the Permian and Anadarko Basins. Unlike the traditional exploration companies, Sitio Royalties generates its revenue through lease and production royalties. It provides the benefits of shedding operational costs. The scale-driven exposure offered by the company to hydrocarbon production particularly helps the company improve its market share.
The 37.47% drop in performance in the past 1 year indicates fragile income foundations that could not effectively return value to the shareholders. For instance, Sitio Royalties Corp. (NYSE:STR) has made huge investments in human resources and systems, which caused the general and administrative expenses to rise by 25% year-over-year in the fourth quarter of 2024. Additionally, the accelerated decline in price takes a least favorable stand against the acquisition activities of the company. Also, land complexities are creating challenges in the Appalachian regions, which is expected to limit the company’s acquisition activities there, thus reducing revenue for 2025 and making the company more financially vulnerable.
Sitio Royalties Corp. (NYSE:STR) offers a dividend yield of 10.05%, the highest in our list. But the outrageous 306.12% payout ratio rings the alarm bell, signaling income-seeking investors to steer clear of this dividend trap.
Overall, Sitio Royalties Corp. (NYSE:STR) ranks first among the 10 dividend trap stocks to avoid. While we acknowledge the potential of dividend stocks as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than STR but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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