With so many top-tier dividend stocks to choose from on the TSX, I focus most of my time and attention on finding the absolute best pick for investors. That said, there’s also the inverse, which can be true: with so many top high-yielding options to choose from, some may not be able to continue to pay out their high dividend yields over time.
One company I’m growing increasingly bearish on in this regard is Yellow Pages (TSX: Y).
Here’s why I think Yellow Pages could be a top dividend stock for investors to avoid right now.
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Revenue decline spells trouble
I think the key catalyst that determines a lot of a company’s upside potential has to do with its underlying fundamentals and relative growth rates. Now, while Yellow Pages stock has surged of late (see chart above), that’s due to more exogenous factors than fundamental ones.
In terms of revenue growth from digital marketing and those fading print directories, things are pointing in the wrong direction. Indeed, digital revenues, which make up 80% of the company’s sales, dropped 6.8% in Q1 2025 alone, while print cratered 10.5%. Over the past five years, earnings per share have plunged 23% annually, with no reversal in sight.
Now, the company’s management team is talking a good game about “bending the revenue curve.” However, customer losses continue to persist, and legacy print is a dying relic. In a world of Google ads and AI-driven marketing, Yellow Pages is swimming upstream against giants. Any whiff of economic slowdown could accelerate the bleed, turning that yield into fool’s gold.
Dividend sustainability could be called into question
The other key driver of uncertainty moving forward is how Yellow Pages plans to fund its impressive dividend yield above 7%. In terms of the stock’s payout ratio, there’s a lot left to be desired in my books.
Last year, Yellow Pages shelled out 102% of profits as dividends. Any number over 100% is a screaming red flag for a lack of long-term dividend coverage. Now, free cash flows could improve (and the current distribution takes up around 50% of the company’s overall operating cash flow). But if margins deteriorate further over time, this stock is at serious risk of a dividend cut.
For those reasons, and expectations that earnings per share could drop another 23% in the year to come, this is a company with too many headwinds to be considered a viable investment in my view.
There are plenty of other mid-single-digit yielding stocks in the market to choose from with much more robust balance sheets. Thus, Yellow Pages looks like a textbook dividend trap, if I’ve ever seen one, right now.
