Hi fellow investors,

High dividend yield is often one of the first metrics retail investors screen for when building income portfolios. However, chasing headline yield without scrutinizing cash flow resilience often leads to a classic "dividend trap"—where capital depreciation far exceeds dividend distributions.

From a fundamental and risk management perspective, here are 3 structural filters to evaluate yield sustainability:

• Free Cash Flow (FCF) Coverage: Ensure dividend distributions are fully backed by sustainable operating cash flow rather than balance sheet debt or asset monetization.

• Payout Ratio Realism: Dividend payout ratios consistently above 80%–90% leave little margin of safety for business reinvestment or cyclical downturns.

• Balance Sheet Leverage: Companies carrying elevated net debt face heightened refinancing risks during shifting interest rate cycles, which can force dividend cuts.

Sustainable yield is a byproduct of operational health, not a substitute for earnings strength.

How do you filter between high-yield dividend traps and true dividend growth counters in your watchlist?