Are these ~6% dividend yields built on shaky foundations?

A Shell fuel nozzle

Increasingly tough trading conditions threaten to put any sort of turnaround at embattled retailer Marks & Spencer(LSE: MKS) on ice, in my opinion.

M&S has invested huge time and money to improve the desirability of its clothing ranges, but these measures have failed to deliver. A 2.3% rise in like-for-like sales of clothing and homeware in October-December was due in large part to a reporting anomaly. Underlying demand for Marks and Spencer's items fell 5.9% during the previous six months.

And the prospect of rocketing inflation in the months ahead is hardly likely to help the British shopping institution's takings as we move through 2017.

Marks and Spencer only got its progressive dividend policy rolling again back in 2015 after years of keeping payouts frozen. But City analysts believe this revival will prove short lived as profits growth drags. Indeed, the number crunchers expect earnings to sink 17% in the year to March 2017, and to slash the dividend to 18.2p per share from 18.7p in the prior period.

A 5.4% dividend yield is clearly quite attractive, smashing the forward FTSE 100 mean of 3.5% by no little distance. But investors should treat this number with some scepticism, as the proposed dividend is still only covered 1.6 times, falling some way short of the established safety benchmark of 2 times. And Marks and Sparks' rising net debt should add extra alarm, clocking in at £2.24bn as of the beginning of October

Besides, the country's mid-level clothes sellers are likely to have to keep slashing prices to beat the competition and ease the pressure on shoppers' wallets at the expense of earnings. And thus the chance of a dividend bounce-back in the near-term or beyond is extremely remote, in my opinion.

Crude clubber

Oil giant Royal Dutch Shell (LSE: RDSB) is also a risk too far for dividend chasers, to my mind.

Despite predictions of a 93% earnings explosion in 2017, Square Mile analysts expect Shell to keep the dividend locked at 188 US cents per share once again. And it is easy to see why, as the driller is still reliant upon asset sales and diligent cost-cutting to ease the pressure of its $52bn acquisition of BG Group last year.

While net debt has been falling more recently thanks to resurgent cash flows, this still came in at a whopping $83bn as of December. Shell is likely to have to keep a close eye on the pennies until this figure drastically falls.

And this could become an increasingly difficult task should the oil market's massive material imbalance, as appears more and more likely, continue long into the future ,as producers in the US, Canada and Brazil ramp up production.

Shell may well have the balance sheet strength to meet this year's projection, allowing investors to reap an exceptional 6.8% yield. But I believe the black gold goliath's long-term dividend prospects remain less than clear.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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