This article will look at the top dividend trap stocks you should avoid in 2025.
During uncertain times, dividend stocks are often seen as a safe bet for investors to cushion the impact. In 2025, however, the cushion may be carrying more risk than reward. Shifting market conditions are revealing signs of trouble underneath the stocks, which were initially appreciated as reliable dividend payers. No, we are not talking just about volatility or short-term noise; we are talking about companies that would seem irresistible with their attractive yield but carry risks capable of eroding your capital.
READ ALSO: 11 Best Russell 2000 Stocks to Buy According to Wall Street Analysts.
A thick fog of uncertainty rests over the investing climate in 2025. Earnings expectations for the large caps have been slashed at an alarming rate in the past few weeks alone. CNBC noted that some of the analysts, who initially predicted a 5% earnings growth for the market indices, have revised their estimation to a flat or even negative outcome by next month. Various companies have pulled their guidance together, reflecting not just caution but an absence of visibility to make the forecast. And by extension, the dividend-paying stocks have become trickier than before.
What’s the cause? The U.S. tariffs. President Trump, though, announced a 90-day tariff-pause on dozens of countries, slapped a whopping 145% tariff on Chinese goods into the U.S. China retaliated with a 125% tariff on U.S. imports, effectively sealing off a $650 billion trading corridor, which was considered a lifeline of multiple industries both in the U.S. and China. According to Reuters, this trade war between two of the largest economies in the world has sent ripples across the already shaken global asset markets. Companies, including the consistent dividend payers, are now facing cost shocks and a sharp decline in their profit margin, which are bound to affect the income of the investors.
Shifts in investor sentiment are also becoming part of these challenges. Along with institutional investors, retail investors are also adopting a wait-and-see approach. Mergers and acquisitions processes are slowing down, capital expenditures are being slashed, and supply chains are being restructured to handle the current market issues rather than the long-term challenges. Recent earnings calls are showing the CFOs prioritizing liquidity and short-term cost optimization. These actions are highly likely to affect the dividends, as it is one of the easiest budget line items to slash.
The situation underscores the importance of not blindly chasing after yields. High dividend yields could potentially be masking a weakness, including earnings fall, escalating debt, or unsustainable payout ratios. In this regard, attractive yields are becoming a trap that can lure investors, only to collapse under pressure when market conditions worsen. With uncertainty outweighing opportunity in 2025, it is immensely necessary to separate solid dividend plays from ticking time bombs.
So, before you decide to incorporate an appealing dividend stock into your portfolio, take a close look at the picks in our article. Stay with us as we count down the 10 dividend trap stocks to avoid in 2025.
A close-up of a laptop monitor with stock market prices scrolling up and down.
Our Methodology
When putting together our list of top 10 dividend trap stocks to avoid, we have followed a few criteria. Primarily, we have set the minimum market cap at $2 billion since investors are less likely to fall for stocks with a smaller cap. The stocks that are on a declining trend have been considered for this article. Such low performance reflects issues within the business operations that have made an impact on the value of the stocks. Also, we have included only those stocks with a dividend yield of 5% or more to ensure that these stocks are attractive enough to lure investors. All our picks have a payout ratio of 100% or more, suggesting an earnings issue within the company, which the investors need to be aware of.
All the data used in the article were taken from financial databases and analyst reports, with all information updated as of April 11, 2025. Our picks are ranked based on their dividend yield.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Stanley Black & Decker, Inc. (NYSE:SWK)
Performance: -36.77%
Dividend Yield: 5.22%
Payout Ratio: 172.49%
A Connecticut-based company, Stanley Black & Decker, Inc. (NYSE:SWK) is a leading manufacturer of hand tools, power tools, and industrial solutions. The company’s product portfolio includes brands such as DeWalt, Craftsman, and Stanley. Its customer base is comprised of both professional and non-professional consumers globally. Stanley Black & Decker, Inc. (NYSE:SWK) derives its market strength from brand equity and innovation in battery and smart tool technologies, which are used to gain a position in the sector against other leading competitors.
The annual decline of 36.77% in the share price indicates that Stanley Black & Decker, Inc. (NYSE:SWK) has been losing its foothold in the industrial tools and household hardware market. Inversely, the consumer and DIY market environment has also been unfavorable, causing an impact on the overall demand for the company’s products. The divestiture of the infrastructure business, combined with the currency headwinds, additionally made a negative impact on the company’s revenue growth. The 2025 guidance anticipates a flat demand environment and an unmitigated impact of $100 million from risks induced by tariffs.
Stanley Black & Decker, Inc. (NYSE:SWK) supports its shareholders with a 5.22% dividend yield. But the dividends are outstripping the earnings with a high payout ratio of 172.49%. With such a high risk, the company earns a position among the worst dividend stocks.
9. ManpowerGroup Inc. (NYSE:MAN)
Performance: -29.41%
Dividend Yield: 5.90%
Payout Ratio: 102.33%
A global leader in workforce solutions, ManpowerGroup Inc. (NYSE:MAN) offers services including recruitment, talent development, and human capital consulting. Headquartered in Wisconsin, the company serves clients in over 75 countries, operating under multiple brands such as Manpower, Experis, and Talent Solutions. Using its digital transformation capabilities and labor market analytics, the company competes with Adecco and Randstad for market share. Strategic focus on skills-based placement supports relevance amid shifting global employment trends.
ManpowerGroup Inc. (NYSE:MAN)’s shares slipped by 29.41% over the last 12 months, indicating low performance in value creation. The company’s adjusted EBITDA went down by 12% in the fourth quarter, year-over-year. Increasing challenges in the European region notably contributed to this decline. Particularly, there was a 16% revenue decline in constant currency in Northern Europe. The company’s adjusted EPS also went down 27% year-over-year in constant currency. These decreases suggest a challenging financial environment for the company. The challenges are expected to persist throughout the first quarter of 2025, potentially reducing the revenue by 6% to 9%.
ManpowerGroup Inc. (NYSE:MAN) offers its shareholders a decent dividend yield of 5.90%. However, its payout ratio, standing at 102.33%, suggests earnings would not be able to cover the dividends, turning the stock into one of the worst dividend stocks for investors seeking reliability.
Hedge Fund Resource Center