The recipe that made food stocks a favorite among income investors is starting to break down. Once one of Wall Street's safest dividend trades, the sector is now under growing pressure. ConagraCAG

may be the first domino, but it's far from the only food company with a dividend under scrutiny.

The warning shot: Conagra slashed its dividend in half yesterday alongside a $1.62B quarterly loss. New CEO John Brase framed the cut as a reset, aiming to restore margins, boost brand investment, and reduce complexity. But the move landed hard asCAG

shares were already down 18% this year before the announcement.

• Conagra's Q4 loss included a $2B non-cash goodwill impairment charge, triggered by a sustained decline in its share price and market cap.
• The company forecast adjusted earnings of $1.40–$1.50 per share for the new fiscal year, below analysts' expectations of $1.56.

On The Chopping Block

Consumer staples are expected to trail the broader market this earnings season, with profit growth of just 5.2% compared with nearly 24% overall. Analysts have already trimmed staples' earnings estimates by ~2.5% since spring, the biggest cuts of any sector except healthcare. The headwinds are stacking up as GLP-1 drugs weigh on snack demand, higher oil prices squeeze margins, and beef and cocoa shortages keep ingredient costs elevated.

• Tyson FoodsTSN
  , Hormel FoodsHRL
  , HersheyHSY
  , and MondelezMDLZ
  all have dividend payout ratios above 100%, meaning they're paying out more than they currently earn.
• General MillsGIS
  and Kraft HeinzKHC
  also have stretched payout ratios after recent losses, with General Mills yielding more than 6%.

The dividend trap: High payout ratios are one of the strongest warning signs for dividend cuts, and several food companies currently have payout ratios above 100%, according to FactSet. Walgreens is a reminder that a sky-high dividend yield can mask a struggling business right up until the payout is slashed. Wolfe Research has flagged PepsiCoPEP

as another dividend watch name. For income investors, a high yield is a reason to dig deeper, not buy blindly.