Double-digit dividend yields are way too tempting for income-focused investors to ignore. After all, a S$100,000 investment into a stock that yields 10% generates S$10,000 in passive income a year; a figure hard to beat by merely investing in most blue-chip stocks or real estate investment trusts (REITs). However, there’s no free lunch in this world; experienced investors know that such high yields are typically not sustainable. In this article, we look at two high-yielding names and their underlying fundamentals to gauge if they’re worth a place on your watchlist.

Why High Dividend Yields Can Be Misleading

Usually, high yields should be met with caution. A stock can offer a yield of more than 10% as a result of share price depreciation because of earnings contraction. In this case, where earnings are under pressure, the high yield could be temporary as management looks to conserve cash by cutting the dividend. This drastically reduces the appeal of a high yield....