10 Dividend Trap Stocks to Avoid in 2025

1. Sitio Royalties Corp. (NYSE:STR)

Performance: -37.47%

Dividend Yield: 10.05%

Payout Ratio: 306.12%

Based in Colorado, Sitio Royalties Corp. (NYSE:STR) acquires, owns, and manages mineral and royalty interests in oil and gas-producing regions across the U.S., primarily within the Permian and Anadarko Basins. Unlike the traditional exploration companies, Sitio Royalties generates its revenue through lease and production royalties. It provides the benefits of shedding operational costs. The scale-driven exposure offered by the company to hydrocarbon production particularly helps the company improve its market share.

The 37.47% drop in performance in the past 1 year indicates fragile income foundations that could not effectively return value to the shareholders. For instance, Sitio Royalties Corp. (NYSE:STR) has made huge investments in human resources and systems, which caused the general and administrative expenses to rise by 25% year-over-year in the fourth quarter of 2024. Additionally, the accelerated decline in price takes a least favorable stand against the acquisition activities of the company. Also, land complexities are creating challenges in the Appalachian regions, which is expected to limit the company’s acquisition activities there, thus reducing revenue for 2025 and making the company more financially vulnerable.

Sitio Royalties Corp. (NYSE:STR) offers a dividend yield of 10.05%, the highest in our list. But the outrageous 306.12% payout ratio rings the alarm bell, signaling income-seeking investors to steer clear of this dividend trap.

Overall, Sitio Royalties Corp. (NYSE:STR) ranks first among the 10 dividend trap stocks to avoid. While we acknowledge the potential of dividend stocks as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than STR but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.

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