Highest-Paying Dividend Stocks in the S&P 500

Most of the stocks in the S&P 500 pay a dividend—422 of them. But only 33 of those qualify as High Dividend Stocks, with yields over 4%. And even fewer S&P companies currently have a dividend yield over 5%—just 14 at latest count. From highest yield (11%) to lowest yield (5.1%), here are the 10 highest-paying dividend stocks in the S&P 500 today:

The 10 Highest-Paying Dividend Stocks in the S&P 500

  1. CenturyLink (CTL)
  2. Macy’s (M)
  3. Seagate Technology (STX)
  4. Kimco Realty (KIM)
  5. Iron Mountain (IRM)
  6. HCP Inc. (HCP)
  7. AT&T (T)
  8. ONEOK (OKE)
  9. L Brands (LB)
  10. Helmerich & Payne (HP)

Here’s a closer look at each one of the top 10 highest-paying dividend stocks.

1. CenturyLink (CTL)

Dividend Yield: 12%

First on the list of highest-paying dividend stocks in the S&P 500 is CenturyLink, a landline telecom. Its business is shrinking as customers sever their phone lines: revenues have been declining since 2012. So CenturyLink is pursuing controlled decay, slowly returning capital to investors. Companies that are shrinking can—and should—return more of their earnings to investors, because they’re no longer investing in the business. It’s not a great policy for the stock price—CTL has lost about 50% of its value over the past five years—but its dividend has remained stable. CenturyLink’s dividend payout ratio is well over 100%, which is way too high for most companies—they’re giving all their profits and then some to investors! But for CenturyLink it’s just the right level.

Free Report: Cabot's Best Dividend Stocks To Buy Now

The world of dividend-paying stocks is ever expanding.

To help sort through it all, our experts have some tips on where to find them, what to look for, and a list of some of their favorite dividend stocks that are hot this month.

Download your FREE report, Cabot’s Best Dividend Stocks for May: Plus DRIP Investing 101 and Why You Should Invest in Dividend Aristocrats.

Get My Free Report!

2. Macy’s (M)

Dividend Yield: 7.1%

Macy’s was only added to the list of the highest-paying dividend stocks in the S&P this summer, and it already has the second-highest yield. The reason, unfortunately for M investors, is a significant decline in the stock’s price, not a big increase in the dividend. Department store stocks have been some of the worst-performing stocks of 2017 so far. The retailers have been closing stores as they lose customers to Amazon.com, and Macy’s is no exception—the company is closing 68 stores this year. The decision follows two years of revenue declines, and sales are expected to fall again this year and next. Eventually, Macy’s 38-cent quarterly dividend could be on the chopping block—the current payout ratio of 69% is triple the historical average, and likely unsustainable. I’d stay away for now.

3. Seagate Technology (STX)

Dividend Yield 6.6%

Ireland-based Seagate Technology makes hard drives and other data storage solutions. Hard drive demand is declining as disc drives are replaced by faster, smaller solid state drives. Seagate’s revenues are declining, slowly, as well. However, the company has stayed afloat, reducing operating expenses and buying back shares to support EPS. And they’ve returned plenty of cash to shareholders. Over the past five years, Seagate’s annual dividend increases have averaged 70% per year! Here’s a chart of STX’s price (blue) and dividends (orange).

Seagate is now attempting to turn its business around, announcing a supply deal with Toshiba and additional cost cuts during its third-quarter earnings call. Management is now guiding revenue and earnings expectations higher, and the stock has gapped up from its lows. We’ll see if the bounce is sustainable.

Seagate Technology is one of the highest-paying dividend stocks in the S&P 500.4. Kimco Realty Corp (KIM)

Dividend Yield: 5.9%

Another casualty of Amazon’s growing dominance, Kimco Realty owns open-air shopping centers. Kimco’s management insists their properties are special and better insulated from the Amazon effect than traditional malls, and they might be right. They don’t include department stores like Macy’s, for example. But Kimco properties have still seen some stores close this year, including at least six Payless outlets. And because Kimco is a REIT (REIT stands for real estate investment trust, a type of company created with high yields in mind) it has a high debt load, which could become problematic if they start losing tenants and their cash flow declines. Those concerns drove KIM to a five-year low earlier this summer, and the yield skyrocketed over 5%. The stock is still struggling to recover.

5. Iron Mountain (IRM)

Dividend Yield: 5.9%

Back to the “old world” companies. Iron Mountain was founded at the height of the cold war to securely store documents underground. The company still stores plenty of important original documents, like film reels and sheet music, but business declined as paper was replaced by digital records. Revenue is fairly steady today, and the company has reorganized as a REIT so it can more easily return most of its cash to investors—the current dividend payout ratio based on EPS is over 800%. Analysts actually expect sales and earnings to grow this year and next (sales by single-digits, EPS by 8% to 15%), so now could be a good time to Buy IRM for its high yield.

6. HCP Inc (HCP)

Dividend Yield 5.9%

HCP is a health care REIT that mostly owns senior housing, life sciences and medical office properties. The company spun off its skilled nursing and assisted living assets last year, reducing its exposure to Medicare reimbursement levels (as well as a bunch of lawsuits against major tenant ManorCare). HCP reduced its dividend as part of the spinoff, and spent the next few months divesting other assets and paying down debt. The company is certainly leaner today than a year ago, but investors don’t seem convinced that the turnaround will lead to real growth: HCP has been underperforming its peers for the past six months. I think investors looking to add a health care REIT to their portfolio will do better with one of HCP’s better performing peers, like Ventas (VTR) or Welltower (HCN), both of which yield around 5%.

7. AT&T (T)

Dividend Yield 5.8%

AT&T is the second-largest U.S. cell network, after Verizon (VZ). The stock is down 20% so far this year, as AT&T and Verizon lose customers to the smaller carriers. Sprint and T-Mobile’s recent merger announcement raised the prospect of an even stronger competitor for the two giants and triggered a nearly 15% drop in T. AT&T’s revenues are expected to decline 2% this year. AT&T is improving margins by cutting costs, and EPS are still expected to grow slightly this year and next, but if the T-Mobile-Sprint merger goes through it would spell an even more challenging future for AT&T.

8. ONEOK (OKE)

Dividend Yield 5.6%

ONEOK is a natural gas pipeline and midstream processing company. Almost 90% of ONEOK’s earnings are fee-based, meaning they don’t depend on natural gas prices (though prices can affect production levels). This summer, the company acquired ONEOK Partners L.P., an MLP, bringing the two firm’s assets under one roof and lowering their cost of funding. Following the transaction, the company raised its dividend to 75 cents per quarter, vaulting it onto our highest paying dividend stocks list. Through 2021, ONEOK is targeting 9% to 11% dividend growth per year. Though OKE can be volatile, it’s a good source of high income.

9. L Brands (LB)

Dividend Yield: 5.4%

Another casualty of Amazon, and its effect on American malls, L Brands is the parent company of Victoria’s Secret and Bath & Body Works. The stock peaked in 2015, although revenues have actually grown in each of the last five years. But analysts expect sales to contract slightly this year, causing EPS to fall by double-digits. And LB’s dividend payout ratio, which is normally in the lows 40s, is now 70%. Avoid.

10. Helmerich & Payne (HP)

Dividend Yield: 5.4%

Helmerich & Payne is in the oil and gas services business. They drill wells and provide other services to oil and gas companies. So while their revenues don’t depend directly on the price of oil, when energy prices fall, drillers drill fewer wells, and HP’s business gradually dries up. That’s what happened in 2015 and 2016, when oil prices got stuck below $50 per barrel. Energy prices started to rise in the second half of last year, and HP began to recover: the company even increased its dividend, to 70 cents per quarter. But the oil price rally faded this Spring and HP’s gains were erased, dragging the stock onto our high dividend stocks list this summer. HP’s payout ratio has now climbed over 100%, making the dividend increase look premature. Analysts still expect sales to rise by double-digits this year and next though, so HP may eventually be worth a look for bargain hunters.

The rest of the highest-paying dividend stocks in the S&P 500 yield 5.1% or less. Many of these lower high yields are more sustainable than those above. For example, there are several utilities, which traditionally have sustainable high yields, on the list, including First Energy (FE), The Southern Company (SO) and Entergy (ETR).

In other words, for sustainable high dividend yields, it can pay to look beyond the highest yielders. For more sustainable dividend yields, consider taking a trial subscription to . My stock picking system, IRIS, ranks dividend stocks on both their dividend safety and dividend growth potential, so you can earn high and reliable income.

to learn more.

*This post was originally published in November 2016 and is periodically updated.

Chloe Lutts Jensen developed Cabot's proprietary Individualized Retirement Income System (IRIS) and to provide both high income and peace of mind. If you’re retired or thinking about retirement, her advisory is designed for you.

 

Comments

You must be to post a comment.