Watch Out for These Dividend Traps

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Dividend-paying stocks have risen to highs not seen in quite some time relative to non-dividend-payers. In fact, the discount that dividend-paying stocks have typically received in the market has virtually disappeared as investors increasingly embrace the investing application of the adage "a bird in the hand is better than two in the bush." However, investors need to understand the story behind a dividend when making investment decisions, particularly when dividend yields rise into double-digit territory. In the following video, Brenton goes through some statistics on a few of the most popular telecom dividend payers and the unfortunate returns that can come from jumping into dividend stocks simply for their attractive yields.

If you're looking for dividend oriented ideas, read the Fool's brand-new special report: "The 3 Dow Stocks Dividend Investors Need." In it, you'll learn about a few Dow components sporting attractive yields that are safe for the long haul, unlike a couple of companies mentioned in the video. It's absolutely free, so just click here and get your copy today.

At the time this article was published Brenton Flynn owns shares of AT&T. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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