Arlington Asset Investment Corp (AI), Windstream Corporation (WIN): The Highest Yielding Dividend Stocks in May

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Windstream Corporation (NASDAQ:WIN) is second with a yield of 12%. The landline telecom company reports earnings on Thursday. Analysts expect the company to report earnings per share of $0.11 and revenue of $1.53 billion. The company has been working to transition to where it gets most of its revenue from business as opposed to residential clients. Last quarter, the company reaffirmed its commitment to its $0.25-per-quarter dividend, despite the fact that the company pays out 87% of its free cash flow as dividends.

FTR Dividend Chart

Source: FTR Dividend data by YCharts.

Investors in Windstream Corporation (NASDAQ:WIN) should take note of what happened at Frontier Communications Corp (NASDAQ:FTR), No. 4 on our list. Frontier is in the same business as Windstream Corporation (NASDAQ:WIN) and also used to pay out a high percentage of its free cash flow as dividends.

In Feb. 2012, Frontier Communications Corp (NASDAQ:FTR) cut its dividend from $0.1875 to $0.10 per quarter and investors sold off the stock, dropping as much as 35% over the following month before recovering slightly. As Windstream Corporation (NASDAQ:WIN)’s payout ratio teeters near 90%-100%, investors should pass on the stock.

Foolish bottom line
Remember, these seemingly irresistible yields could be ticking time bombs, so do your own due diligence. Also, make sure you diversify your picks across various sectors. As investors relearn every decade or so, you never want to put all your eggs in one basket — no matter how tempting the dividends are.

The article The 25 Top-Yielding Dividend Stocks in May originally appeared on Fool.com and is written by Dan Dzombak.

Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He owns shares of Frontier Communications. The Motley Fool recommends and owns shares of Seadrill. It owns shares of United Online.

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