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5 Scorching-Hot High-Yield Dividend Stocks -- Are They Stocks to Buy?

GME Gross Profit Margin (TTM) Chart
GME Gross Profit Margin (TTM) Chart

GME Gross Profit Margin (TTM) data by YCharts .

In contrast, Kohl's gross margin is at a 10-year low as slowing customer traffic has forced it to ramp up price discounts.

Sure, GameStop's traditional video-game niche will be toast as the gaming industry shifts to digital sales and destroys the retailer's core buy-sell-trade model. Yet CEO Paul Raines and his executive team have been preparing for that eventuality for years, most recently by pushing into related product lines like smartphones, tablets, and collectible gaming merchandise. Management targets producing more than half of profits from sources other than disc-based video games by 2019, and the company is making big strides toward that target.

In the meantime, investors don't have to worry about an imminent cut for GameStop's dividend. The company expects to produce a record $4 per share of earnings in 2016, which should easily cover the $1.50 per share it has promised in dividends.

Because of the baggage they bring, high-yield dividend stocks often require additional scrutiny during investment decisions. But by limiting the focus to financially solid companies, investors can weed out the less desirable stocks and lower their risk of being burned by a dividend cut.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has the following options: short October 2016 $28 puts on GameStop. Try any of our Foolish newsletter services free for 30 days . We Fools may not 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 .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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