In this article, we discuss 10 highest dividend-paying stocks in the S&P 500. You can skip our detailed analysis of high-dividend stocks and their performance over the years, and go directly to read 5 Highest Dividend-Paying Stocks in the S&P 500.
According to a report by Barron’s, high-yielding dividend stocks have consistently surpassed the S&P 500 performance over the last thirty years. On average, they've outperformed the S&P 500 by over 20% annually in relative year-over-year total returns from the lowest point to the highest point in cycles lasting nearly a year. These stocks tend to sustain their above-average performance for almost two years after reaching the peak.
BMO’s Chief Investment Strategist Brian Belski spoke with Barron’s about the strong performance of high-yielding dividend stocks over the years. Here are some comments from the analyst:
“There have been only two periods where high dividend-yielding stocks have performed worse relative to the S&P 500 on a year-over-year basis: the tech bubble and the pandemic. According to our work, this type of abnormal underperformance has typically proved to be an inflection point historically. These stocks tend to stage an impressive recovery following such levels.”
Many other reports have shown that stocks boasting high dividend yields typically offer more favorable risk characteristics compared to those that do not pay dividends. Based on research carried out by Global Equity Funds, a division of Deutsche Bank Group, it was found that high dividend stocks have demonstrated greater resilience compared to the overall market during downturns spanning from 1927 to 2015. Specifically, the downside capture ratio for high dividend stocks has been 81% or less across different extended periods. In simpler terms, during months when the S&P 500 Index experienced declines, high dividend stocks decreased by approximately 19% less than the broader market. The report also mentioned that within the European market, high-dividend stocks offer a greater direct return when compared to high-yield corporate bonds.
A report by Global X also shed light on the strong performance of high-yield dividend stocks over the years. From 1960 to 2017, high-yielding stocks have consistently delivered an average yearly dividend yield of 6.4%, significantly surpassing the performance of the S&P 500 by almost 3.0% on an annualized basis. This outperformance trend extends to periods of rising interest rates, with high dividend stocks outpacing the S&P 500 in 7 out of 10 instances since 1960. However, during three specific instances marked by exceptionally swift rate hikes, high dividend stocks experienced underperformance compared to the broader market.
Currently, nearly 75% of the companies in the S&P 500 pay dividends to shareholders. As per data from Yale, the median dividend yield of the S&P 500 from 1960 to 2022 stood at 2.90%, with peak yields observed during the 1980s and lower levels recorded in the 2000s. Altria Group, Inc. (NYSE:MO), AT&T Inc. (NYSE:T), and Verizon Communications Inc. (NYSE:VZ) are some of the highest-paying dividend stocks in the S&P 500 among others that are discussed below.
10 Highest Dividend-Paying Stocks in the S&P 500
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Our Methodology:
For this list, we scanned the list of the S&P 500 companies and picked 10 dividend stocks with the highest dividend yields, as of March 12. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 943 funds as of Q4 2023. The stocks are ranked in ascending order of their dividend yields, as recorded on March 12. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Pfizer Inc. (NYSE:PFE) is a multinational pharmaceutical company that is engaged in the research, development, manufacturing, and marketing of a wide range of prescription medicines, vaccines, and consumer healthcare products. The company offers a quarterly dividend of $0.42 per share, having raised it by 2.4% in December 2023. This was the company's 14th consecutive annual dividend hike, which makes PFE one of the best dividend stocks with high yields. The stock has a dividend yield of 5.42%, as of March 12.
In addition to popular high yield dividend stocks like Altria Group, Inc. (NYSE:MO), AT&T Inc. (NYSE:T), and Verizon Communications Inc. (NYSE:VZ), investors can also consider Pfizer Inc. (NYSE:PFE) due to its strong dividend growth.
The number of hedge funds tracked by Insider Monkey owning stakes in Pfizer Inc. (NYSE:PFE) grew to 79 in Q4 2023, from 73 in the previous quarter. The collective value of these stakes is over $2.2 billion.
Diamond Hill Capital mentioned Pfizer Inc. (NYSE:PFE) in its Q4 2023 investor letter. Here is what the firm has to say:
“Among our bottom contributors in Q4 were BorgWarner and Pfizer Inc. (NYSE:PFE). Biopharmaceutical company Pfizer was pressured as COVID sales were slower than expected in Q4. However, outside COVID-related sales, the base business is performing as expected, and the company is starting a cost-cutting program that should restore margins to pre-pandemic levels. We continue to like Pfizer for its diversified business, strong cash flow generation capabilities and balance sheet, and solid leadership under a quality CEO.”
Truist Financial Corporation (NYSE:TFC) is next on our list of the best dividend stocks with high yields. The financial services company provides a wide range of banking, lending, investment, and wealth management services to individuals, businesses, and institutions. On January 23, the company declared a quarterly dividend of $0.52 per share, which was in line with its previous dividend. The stock's dividend yield on March 12 came in at 5.6%.
Truist Financial Corporation (NYSE:TFC) was a popular stock among hedge funds at the end of Q4 2023 as 59 funds tracked by Insider Monkey owned stakes in the company, growing from 47 in the preceding quarter. The consolidated value of these stakes is more than $2.11 billion. With roughly 11 million shares, Citadel Investment Group was the company's leading stakeholder in Q4.
Diamond Hill Capital mentioned Truist Financial Corporation (NYSE:TFC) in its Q2 2023 investor letter. Here is what the firm has to say:
“Also among our bottom contributors were AbbVie and Truist Financial Corporation (NYSE:TFC). Truist, while not considered a “money center,” is a large, super-regional bank with an attractive Southeastern US footprint that has added value to the communities it serves via its extensive branch network and lending franchises. Truist also owns the fifth largest insurance brokerage in the US, which it recently sold a portion of for roughly $3 billion. Truist’s share price remained under pressure during the quarter as the market continued to be concerned with lower values of longer-duration assets and increasing deposit costs. That said, we remain comfortable with our current position in Truist and believe a significant amount of pessimism is baked into its current share price.”
Also known as monthly dividend stock, Realty Income Corporation (NYSE:O) is next on our list of the best high-yield dividend stocks. The American real estate investment trust company specializes in owning and managing a diversified portfolio of commercial properties. It currently offers a monthly dividend of $0.2565 per share and has a dividend yield of 5.80%, as of March 12. The company holds a 29-year track record of consistent dividend growth.
Realty Income Corporation (NYSE:O) was a part of 28 hedge fund portfolios at the end of Q4 2023, up from 23 in the previous quarter, according to Insider Monkey's database. These stakes are worth $332.5 million in total.
Kinder Morgan, Inc. (NYSE:KMI) is one of the largest infrastructure companies that is primarily involved in the transportation and storage of natural gas, crude oil, refined petroleum products, and other energy-related products. On January 29, the company announced a quarterly dividend of $0.2825 per share, which was consistent with its previous dividend. Overall, it has raised its dividends for the past six consecutive years, which makes KMI one of the best dividend stocks with high yields. As of March 12, the stock has a dividend yield of 6.29%.
At the end of December 2023, 42 hedge funds invested in Kinder Morgan, Inc. (NYSE:KMI), which remained unchanged from the previous quarter, as per Insider Monkey's database. These stakes have a consolidated value of $977.8 million. Among these hedge funds, FPR Partners was the company's leading stakeholder in Q4.
With a dividend yield of 6.41% as of March 12, AT&T Inc. (NYSE:T) ranks sixth on our list of the best dividend stocks with high yields. The American multinational telecommunications company owns and operates a diverse portfolio of media and entertainment assets. It offers a quarterly dividend of $0.2775 per share and has been making regular dividend payments to shareholders since 1995. The company's cash position for FY23 remained strong as it generated $38.3 billion in operating cash flow during the year, up $2.5 billion when compared with 2022.
T can be added to high dividend portfolios alongside AT&T Inc. (NYSE:T), and Verizon Communications Inc. (NYSE:VZ).
Insider Monkey's database of Q4 2023 indicated that 66 hedge funds held stakes in AT&T Inc. (NYSE:T), up significantly from 52 in the previous quarter. These stakes have a collective value of roughly $3 billion.
