10 Dividend Trap Stocks to Avoid in 2025

3. The Wendy’s Company (NASDAQ:WEN)

Performance: -31.60%

Dividend Yield: 7.52%

Payout Ratio: 105.26%

With headquarters located in Ohio, the global fast-food restaurant chain The Wendy’s Company (NASDAQ:WEN) specializes in making and selling hamburgers, chicken sandwiches, and frozen desserts. The company operates through a mix of company-owned and franchised locations, serving consumers in North America and international markets. Notable competitors like McDonald’s and Burger King prevent market share concentration. However, The Wendy’s Company (NASDAQ:WEN) leverages brand loyalty, menu innovation, and digital ordering platforms to enhance customer engagement and sustain a large customer base.

Despite the support from their breakfast expansion and global franchising strategy, the company incurred a decline in its value by 31.60%. The Wendy’s Company (NASDAQ:WEN) has closed several restaurants that were underperforming in the last quarter of 2024. These closures are expected to reflect negatively on the 2025 sales growth. Investments in field operations and higher incentive compensation could potentially drive up the G&A expenses for 2025, thereby limiting the company’s net income. Above all, the company has reduced the dividend payment. To fund the growth investments, the reduced dividend payment increases the concern of the income-focused investors regarding the company’s financial stability in 2025.

The Wendy’s Company (NASDAQ:WEN)’s shareholders benefit from a 7.52% yield. However, the yield is backed by a 105.26% payout ratio, raising questions regarding the company’s sustainability and joining other worst dividend stocks investors must stay away from.