Shares/Stock What's Dividend Trap?

There are many ways that people and companies use to make big profits, one of which is using the Dividend Trap method, so that it will be detrimental to stock buyers. Therefore, if you are going to buy shares, you should be careful, because in the capital market, dividend traps often occur, because in general the demand for shares will be high, when dividends will be distributed to shareholders.
so there are investors who will fall into the dividend trap.
What's Dividend Trap?
The dividend trap is a trick where the dividend yield is increased, so that the stock will become attractive and promising to invest, so that there will be many buyers, even though the stock price is actually heading for a downtrend. Of course, investors who buy these shares at a higher price than they should have, have entered the dividend trap, because after the cum date, the price will fall and of course investors will lose.

 

[Jasz]

Dividend trap is a stock that has high dividend yield but it doesn't mean the stock is good.

The dividend yield of a stock is its annual dividend divided by its price per share. It indicates how much money you earn with the stock every year.

For example, if you buy a stock for $10, and it pays out $1 in dividends per year, it would be said to have a 10% dividend yield.

A higher dividend yield means more money for you, right? Not necessarily.

In theory, a company can only pay out dividends if it's profitable and has cash left over at the end of the year after paying its expenses and investing in growth.

But companies can take on debt to finance their operations and still pay out dividends to shareholders. This is called "paying out a dividend from debt".

These debt-fueled dividends are unsustainable because eventually the company will have to stop paying them. And when this happens, the price of the stock will go down, increasing its dividend yield even more. This is how you get into the "dividend trap".