With shares of World Wrestling Entertainment Inc. (NYSE: WWE) trading at $16 per share, the yield on its $1.44 per share yearly dividend is nearly 9%. Is this a dividend trap or a great way to generate income?

Since the company raised its quarterly dividend in February, from $0.24 to $0.36, the company has yet to report EPS above its dividend payment. For the June '08 quarter the company reported EPS of $0.10 and for the March quarter the company reported EPS of $0.27. The company's trailing 12-month EPS is $0.79, yet the dividend payout for the past four quarters equals $1.32 (one was at the old $0.24 rate).

The McMahon family is getting a dividend of $0.24 per share on its controlling position, waiving $0.12 per share of the dividends. But even at the McMahon family rate the dividend payout for the past four quarters of $0.96 is above the $0.79 in EPS.

Where is this extra money to pay the dividend coming from? To keep paying the dividend the company is likely going to have to dip into their $138 million cash hoard.

World Wrestling Entertainment recently told Barron's it remains committed to the dividend over the long term. Also in Barron's, a major shareholder said, "They will not cancel this dividend, period." Also, WWE has never cut their dividend. While these data points make me feel okay about the dividend, the recent earnings power scares the daylights out of me. Unless the company can keep expenses under control and prove its earnings power I will continue to worry about the sustainability of the dividend.

World Wrestling Entertainment is a dividend play that is not for the faint of heart, but it could be rewarding for those that don't mind a few sleepless nights.

The ex-dividend date on World Wrestling Entertainment latest $0.36 dividend is tomorrow. Which means you will have to buy the stock today to capture the dividend payout.

IN OTHER NEWS: