We had a cracking episode this week, and not just because it’s Easter! In episode 243, the Dividend Talk crew was joined by Nathan from Dividend Watch for a great chat about those tempting but risky high-yield stocks—also known as dividend traps. The conversation covered everything from portfolio cleanups and personal investing stories to data-backed dividend strategies and the psychology behind why we chase yield.
Timestamps and Tickers
Here’s a quick guide to the episode’s key sections, along with the companies and tickers mentioned along the way:
- 00:00 – Easter Chit-Chat & Introductions
- 03:00 – What Exactly Are Dividend Traps?
- 06:00 – Johnson & Johnson (JNJ)
- 11:00 – Tariffs, Trade Talk, and Market Reactions
- 14:45 – Dividend Aristocrats vs. S&P500 (NOBL, SPY)
- 20:00 – LVMH, Hermes, and Luxury Stocks (LVMH, MC.PA)
- 27:00 – Psychology of Yield Chasers
- 33:00 – Nathan’s 6-Point Dividend Checklist (AVGO, ADP, VYM)
- 42:00 – Listener Questions & Golden Eggs (Viatris, Enagas, BAT, Shell)
- 1:03:00 – Community Portfolio: Out Goes BAT, In Comes ADP
Headlines
Nathan and the hosts kicked things off with a nod to Johnson & Johnson’s (JNJ) impressive record—63 years of dividend increases. There was a bit of concern about its biotech-heavy shift, but JNJ’s consistent earnings and strong payout history still give it a lot of credibility with income investors.
Wealso touched on the wider uncertainty in the market, with tariffs and inflation bouncing prices around. Plenty of high-quality names are trading near 52-week lows, which means opportunity for long-term investors… if you know where to look.
The Truth About Dividend Traps
So, why do people fall for high-yield stocks?
Nathan broke it down in plain terms: high yields appeal to our natural fear of “not having enough.” Whether you’re just starting out or managing your retirement income, that 7–10% yield looks great on paper. But that’s where many get burned.
Nathan’s key tool for filtering quality dividend stocks is a 6-point checklist, focusing on things like payout ratio, dividend growth, earnings growth, and debt levels.
Nathan’s 6 Dividend Checks
- Payout ratio under 60%
- Dividend CAGR > 5%
- EPS growth > 5%
- Market cap > $10B
- Debt-to-equity under 2x
- 10+ years of dividend growth
He also gave a heads-up on what to watch for: super high payout ratios, especially in sectors like tech or oil, are often a red flag. A juicy yield with no earnings support is a trap waiting to be sprung.
Listener Questions
“What’s the golden egg in your portfolio?”
Nathan’s watching ADP closely—solid growth, great dividend history, and room to run. EDGI’s keeping an eye on LVMH and Novo Nordisk as they come off their peaks. Derek’s still trimming after Enagas let him down with a surprise cut.
“Any stinkers you’re ditching?”
Viatris and Enagas both made the list—either due to business changes or broken dividend promises.
“What should companies spin off?”
Nathan floated the idea that big tech (like Meta or Alphabet) could be forced to break up. European picks like Nestlé’s water division or a Red Hat spin-off from IBM also got mentioned.
“Ever convince someone to invest?”
Everyone’s helping friends and family get started—usually pointing them toward ETFs or simple dividend strategies. Nothing fancy, just the basics that work.
Community Portfolio: Out with BAT, In with ADP
As always, each guest gets to swap one holding in the Dividend Growth Community Portfolio. Nathan decided to give British American Tobacco (BAT) the boot, citing long-term concerns about the business model and a shift away from tobacco globally. Replacing it? ADP (Automatic Data Processing). It’s not the highest yielder, but it brings dependable growth, a strong balance sheet, and 42 years of dividend increases. Plus, it fits Nathan’s “invest in your vision of the future” approach—fewer cigarettes, more paychecks.
Plus, hear our thoughts on companies like Johnson & Johnson, Broadcom, and many more.
Tickers mentioned: JNJ, AVGO, SCHD, VYM, AT&T, JEPQ, JPI, LVMH, ASML, NOVO, UN, SAP, IBM, BRBY, META, GOOG, MSFT, AAPL, SHEL, AGG, BTI.
Support Us
There are a couple of ways that you can support me if you like my content
Free Ways to Support Us
- Follow us on social media. Twitter or DividendTalk (@dividendtalkpodcast) • Instagram photos and videos
- Listen to our Podcast Dividend Talk | Podcast on Spotify
- Follow my Buddy Home European Dividend Growth Investor – European Dividend Growth Investor (europeandgi.com)
- Subscribe to my YouTube channel, Dividend Talk, on YouTube.
Become a Premium Member and join our growing community!
Sign up here to access one newsletter, three dividend stock cards, and three deep dives to see what you can expect from our analysis. Download Your Free Samples – Dividend Talk
Affiliate links: I use these services. If you plan to use these anyway, it won’t cost you any more, but I may receive a commission.
- Seeking Alpha – I use seeking alpha quite a bit. They have a free version, but I will get a commission if you sign up for the premium version. ( I use the premium version)
- Buy me a coffee – if you don’t want to use any of the above services, you can always buy me a coffee.
- Buy a bracelet from my niece – BraceletsByLucyIE – Etsy Ireland. I am trying to teach my niece what they won’t teach her at school. 15% of all profits are mine, but I donate this to charity as my main goal is to teach Lucy about business
Disclaimer
Dividend Talk is not a licensed or registered investment adviser or broker/dealer. We are not providing you with individual investment advice on this site. Please consult with a licensed investment professional before you invest your money. This site is for entertainment, informational, and educational use only.
Any opinion expressed on the site here and elsewhere on the internet is not a form of investment advice provided to you. We use information, data, and sources in the articles we believe to be correct at the time of writing them, but there is no guarantee of their accuracy, completeness, timeliness, or correctness. We are not liable for any losses suffered by any party because of information published on this site. Past performance is not a guarantee of future performance
