Dividend Yield Trap refers to a situation where an investor continues to invest in a stock with high Dividend Yields but weak fundamentals. Weak fundamentals amplify the risk of earnings downgrades. Plummeting stock prices may artificially inflate Dividend Yields. However, earnings downgrades signal that dividends payments may not be sustainable in future. Capital loss from a moribund stock combined with a decline in Dividend Payouts is a double whammy for investors. It is pivotal to perform due diligence of the stocks in order to identify any red flags like erratic cash flows, rising leverage, negative free cash flows etc.