Investors tend to view dividends as a general signal of corporate financial quality. The logic is sound: Companies typically don't pledge to pay their shareholders a regular, fixed sum unless they can afford it with plenty of room to spare. So where you find dividends, you'll often find a healthy bottom line.
But that assumption has its limits. As a dividend yield starts to climb well above market and sector norms, investors begin to wonder about that payout's sustainability. It could be that the company is dedicating too high a percentage of its profits to maintaining that dividend. Or it could be that the yield is growing because shares are diving, reflecting some sort of fundamental weakness.
