3 high-yield ASX dividend shares I would avoid

In terms of dividends the ASX is one of the most generous share markets in the world.

But not all shares on the local market are worthy of investment. In fact, here are three dividend shares that I would suggest investors avoid:

G8 Education Ltd (ASX: GEM)

Late last year this childcare operator downgraded its profit guidance from mid-$170 million to approximately $160 million following a decline in occupancy levels. This was a major surprise considering how positive management sounded when G8 Education released its half-year results. So although its shares provide a trailing fully franked 7% dividend, I would stay clear of G8 Education until there are signs of improvement in its occupancy levels, lest its performance worsen and lead to a dividend cut.

QBE Insurance Group Ltd (ASX: QBE)

While the worst may now appear to be over for the insurance giant after advising that it expects to report a massive $1.2 billion after tax loss in FY 2017, there have been numerous times over the last decade that this was believed to be the case. In my opinion its unreliable and largely disappointing performance is a red flag and makes it one to avoid. Instead, I would consider one of the many other insurance companies that are listed on the Australian share market.

Retail Food Group Limited (ASX: RFG)

At the current price this food and beverage company’s shares provide a trailing fully franked 14.4% dividend. However, I don’t for a second believe that it will be in a position to maintain this dividend in FY 2018 due to the catastrophic events that have unfolded this year. As things stand, Retail Food expects first-half statutory profit to be lower than $22 million. This means a decline of at least 34% on the prior corresponding period. As I expect things to deteriorate in the second-half, I suspect that there’s a chance its dividend could even be suspended. After all, its balance sheet is not the healthiest.

Instead of buying the three dividend shares above, I think investors would be better served with this high-quality dividend share. I think its generous yield and potential share price upside make it a great buy.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Retail Food Group Limited. The Motley Fool Australia has recommended G8 Education Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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