Dividend Yield higher than Bond Yield

Hi all,

Why having a higher dividend yield than a bond yield is a cause for concern?


That means stocks are tanking! Bad bad bad :slight_smile:

What makes you think that it’s a cause for concern?

I do not have an argument that is why I decided to ask for it. To my mind, it would be hard to see any explicit relation between dividend and bond yields. One of the prep providers mentioned this statement in the lecture.

This is very similar to the Fed Model in level 3, except it talks about the Earnings Yield on stocks vs earnings Yield on Bonds.

Apparently this is what makes you think that it’s a cause for concern:

Do you mean concern about shareholders shifting company risk to bondholders by increasing the dividend payout ? Cause this could be a concern and that’s why bond covenants (i.e. maximum payout ratio).