Answer: Dividends being financed by new debt

## Explanation **Option A: Dividends being financed by new debt** - This is the correct answer because: - When a company uses new debt to pay dividends, it indicates that its operating cash flows are insufficient to cover dividend payments - This creates a dependency on external financing rather than sustainable internal cash generation - It signals potential financial distress and inability to maintain dividend payments long-term **Option B: Dividend yield at the lowest historical level** - This is not necessarily a negative signal: - Low dividend yield could simply mean the stock price has increased significantly - It doesn't directly indicate sustainability issues with the dividend itself **Option C: Dividend coverage ratio consistently increasing** - This is actually a positive signal: - Increasing dividend coverage ratio means the company has more earnings available to cover dividend payments - It indicates improving ability to sustain dividends, not a warning sign **Key Concept**: The most reliable early warning sign of unsustainable dividends is when they are being paid from sources other than sustainable operating cash flows, particularly when financed by debt.

Author: LeetQuiz .