Ten years after the lows of the Great Recession, much has changed on both Wall Street and Main Street. But one frustrating fact of life that’s remained stubbornly the same has been the age of low interest rates.
With Treasurys yielding less than 3 percent, high dividend stocks pack far more appeal than they used to. Of course, high yields can also often be associated with struggling businesses in over their heads, and high yields alone do not a good stock make.
In order to focus on higher-quality companies, here’s a look at 10 of the highest dividend paying stocks in the S&P 500 (.SPX), in ascending order.
#10: Newell Brands
A leading retailer of everyday household products, Newell Brands is one of the great under-the-radar, consumer-facing companies in the U.S. Brands like Crock-Pot, Mr. Coffee, Rubbermaid, Marmot, Elmer’s, Paper Mate and Sharpie all reside under its umbrella. Still, the reason NWL is one of the highest dividend paying stocks in the S&P has more to do with its multiyear sell-off than its devotion to income investors. This year will be crucial if Newell Brands is to execute a successful turnaround, as NWL recently sold its Jostens and Pure Fishing brands for $2.5 billion, vowing to focus on consumer goods and higher margins.
#9: Altria Group
Altria is always among the high dividend stocks, due to the smooth, predictable and low-growth nature of its business: tobacco. Always fraught with regulatory hurdles and the threat of ever-increasing taxation – plus the increasingly health-conscious consumer – Altria would be in big trouble if it didn’t sell one of the most addictive substances in the world. With brands like Marlboro, Black & Mild, Copenhagen and Skoal, its customers also happen to be extremely loyal to the brand. Analysts only expect low single-digit sales growth over the next few years, but that’s fine for many conservative investors. MO pays roughly 80 percent of profits out as dividends.
One of the world’s largest investment managers, Invesco oversees roughly $900 billion in assets – giving it a pretty considerable opportunity to make a good living by taking a modest cut of assets under management (AUM). Invesco offers a wide range of products and services, notably including exchange-traded funds of all sizes, focuses and ilks. IVZ’s products boast hundreds of billions in AUM in both active and passive funds, which in turn are marketed to retail investors, institutional investors, high-net worth clients and other institutions. The recently announced acquisition of OppenheimerFunds should provide cost synergies going forward.
Famed department store chain Macy’s is increasingly mentioned among high dividend stocks nowadays – that tends to happen when share prices are constantly eroding. Like many of its peers, Macy’s has been struggling to battle the long-term trend toward e-commerce and the secular decline of malls, Macy’s bread and butter. After rallying in the first half of 2018, Macy’s brief good luck hasn’t lasted, and shares are now re-approaching long-term lows reached in 2017. That said, Macy’s payout ratio, or the percentage of profits paid out as dividends, is relatively low, ranging between 30 and 40 percent.
#6: Kimco Realty Corp.
Unlike a handful of the other high dividend stocks on this list, KIM shares haven’t been stubbornly declining over the last year. As the first member of this group that’s a real estate investment trust, practically Kimco’s entire appeal to investors centers around its dividend. The company specializes in acquiring, developing and managing retail shopping centers in large U.S. urban centers. As a REIT, Kimco must pay out 90 percent of taxable income as a dividend; by entering into this structure, REITs don’t have to pay corporate taxes, avoiding the double taxation that would occur for investors otherwise.
Like tobacco heavyweight Altria, AT&T is a large-cap, blue-chip defensive stock with a predictable, consistent, and heavily entrenched business with impressive cash flows and little explosive growth potential in its future. America’s largest telecom company prides itself on returning capital directly to shareholders, paying out a reasonable 60 to 70 percent of earnings to investors in quarterly stipends. With a yield easily more than double the 10-year Treasury, AT&T is a prime choice for conservative long-term income investors. One of the elite so-called “dividend aristocrats,” AT&T has raised its dividend for 34 consecutive years.
#4 Ford Motor Co.
A traditionally cyclical business, U.S. automaker Ford is largely unloved by Wall Street, particularly compared to some of its sexier peers. In particular, electric carmaker Tesla (TSLA) is currently worth about 30 percent more than Ford, despite Ford’s 2018 revenue being roughly eight times higher ($160.3 billion versus $21.5 billion) than Tesla’s. One thing Ford has in spades that Tesla lacks, however, is profitability. Trading at less than seven times forward earnings, Ford makes sense for most patient long-term investors. Ford is unlikely to be one of the highest dividend paying stocks in the S&P 500 for years on end.
#3: Iron Mountain
Global storage and information management provider Iron Mountain has a boring little business – precisely the type of business conservative income investors should be seeking out when selecting high dividend stocks. Servicing more than 225,000 client organizations, Iron Mountain is the provider of choice for many medium- and large-sized companies seeking reliable storage options for documents, data and other valuable assets. IRM is managing the digital renaissance by making data centers and cloud offerings a larger part of its service. The company is profitable and successful now, but shareholders should watch carefully as digital storage increasingly dominates.
#2: Macerich Co.
It’s no coincidence that another REIT ranks among the highest paying dividend stocks in the entire S&P. Like Kimco Realty, Macerich is a retail REIT, focusing on commercial properties in high-traffic metro markets across the U.S. While this insulates Macerich to an extent from the threat of e-commerce, shares have still suffered through a tough multi-year stretch; by early 2019 MAC stock had fallen 50 percent from 2016 highs above $90 a share. Although dividends have risen in recent years, a special dividend hasn’t been declared since 2016, and profits have fallen markedly, along with the share price.
The stock with the highest dividend in the S&P 500 is CenturyLink, the telecommunications provider. Although a dividend greater than 8 percent is about three times what U.S. 10-year Treasurys currently yield, CTL is a prime example of how high dividend stocks often carry a disproportionate amount of risk with them as well. Shares have plunged in recent years, and in February CenturyLink slashed its dividend by 54 percent. That said, this will save the company $1.3 billion annually, making its payout far more sustainable over time. Risk-tolerant income investors should consider CTL if and when this ruthless selloff subsides.