"The risk is the cut in the dollar amount of the dividend.  A stock that is paying 10% yield against its price, with a P/E of 14 is paying $1.40 in dividends for every $1.00 in earnings.  How long can that go on without a cut?"

I don't follow your math.  But what you are saying is that, if this same stock's price doubles, it's yield will be halved (both at the same earnings), and it is somehow a 'safer' dividend?  It's P/E has doubled!

Again, this doesn't make sense to me."

El,

I am math challenged, no doubt.

It is my understanding that p/e multiple of 14 would mean that the price per share is 14 times the earnings per share.  It is also my understanding that a 10% dividend yield, would be 10% of the share price times the shares owned.

So for each $1 of earnings the price would be $14.  And if the dividend was 10% of that, then the dividend would be $1.40 for each $1 of earnings.

Where does that not make sense?

best,

Bill