Hi fellow investors,

High-dividend counters are naturally attractive for income-focused portfolios, especially in uncertain macro environments. However, a high headline yield (e.g., >7%) can easily turn into a value trap if it is driven by a falling share price rather than expanding underlying profitability.

When screening high-dividend counters on the Bursa, consider these 3 institutional filters:

• Free Cash Flow (FCF) Coverage: Always evaluate dividends against Free Cash Flow per share rather than net accounting profit. Dividends funded by debt or one-off asset sales are unsustainable and signal imminent payout cuts.

• Payout Ratio Safety Margin: A sustainable payout ratio generally sits between 50% - 70% for non-REIT counters. A ratio consistently exceeding 90% leaves zero capital buffer for business reinvestment or economic downturns.

• Total Return Perspective: Dividend yield is only one component of total performance. A 7% yield will not protect your portfolio if capital erosion pulls the underlying share price down by 20% over the same holding period.

Dividend investing requires assessing balance sheet strength, not just chasing trailing numbers. What metrics do you prioritize when filtering high-yield stocks from value traps?