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High Paying Dividend Yield: A Money-Making Opportunity or a Red Flag?

It’s important to own dividend paying stocks with high yields, Jim Cramer said on Monday.

“If you pass up on high yielders,” the “Mad Money” host said “you’re effectively giving up on 40 percent of the gains from stocks.”

However, Cramer mentioned that yields that are too high can be a red flag that the dividend may not be sustainable.

Cramer pointed to the telecommunications company Windstream, as an example, which pays out about a 10.66 percent yield but whose stock got crushed after it reported a miss on August 9.

So, is the dividend sustainable?

Since it is a telecommunications company, you want to look at the company’s cash flow. The company should throw off $2.82 of cash flow per share this year, which should be more than enough to cover the dividends, Cramer said. But can they deliver on a full turnaround?

To find out more, Cramer sat down with Windstream President and CEO Jeff Gardner. Check out the video for the full interview.

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