S&P 500: Here Are The 8 High-Dividend Stocks Everyone Is Racing To Buy

The race is on to add dividends to stock portfolios. But investors are still being picky in the S&P 500 — and know exactly what they’re looking for.

X

Eight high-dividend stocks in the S&P 500, including energy firms Devon Energy (DVN) and Williams (WMB) plus consumer staples Philip Morris International (PM) and Altria (MO), are soaring this year as the market itself sags, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And all of these stocks pay 4.5% dividend yields, or much higher.

Yes, big dividends are in. But don’t make the mistake of rushing to own just any high yielding stock in the S&P 500. Investors are being very discriminating on what kinds of dividend payers they like. And that’s especially the case now that bond yields are rising and giving the dividends a run for their money.

Investors looking for yield from stocks can now be a little choosier.

“The yield on the 10-Year Treasury note has pushed up to the 2% mark for the first time since mid-2019. At the same time, the dividend yield of the S&P 500 sits around 1.38%,” said Bespoke Investment Management. “The spread between the yield on the 10-Year and the S&P 500’s dividend yield hasn’t been this wide since early 2019.”

Not All S&P 500 Dividends Are Created Equal

Investors are chasing some S&P 500 dividends. But not all. Understanding the difference is paramount.

Just look at the stats. Shares of the nearly 400 stocks in the S&P 500 that pay a dividend are actually down 4.1% this year. And the SPDR S&P Dividend ETF (SDY), which owns dividend paying stocks, is also down 4% on the year.

And it’s not simply dividend growth S&P 500 investors are looking for, either. The Vanguard Dividend Appreciation ETF (VIG) only owns stocks bumping up their dividends. But that ETF is down 7.5% in 2022 so far.

Granted, that beats the 7.6% drop this year by the S&P 500. But only marginally. So, what’s in style with dividend investors now? High yield that’s sustainable amid inflation. In a world where you can get 2% without risk from Treasuries, it stands to reason it takes a head-turning dividend to draw investors’ interest. The Vanguard High Dividend Yield ETF (VYM) is down the least of the major dividend ETFs this year: 1.4%.

It’s still down, though. So, what are S&P 500 investors eager to buy then?

Energy Dividends Are Red Hot

How do you find a 4.5%-plus dividend, plus stock gains this year? Odds are, it’ll be in the S&P 500 energy sector, as Warren Buffett and other investors have found out.

Half of the eight high-yielding S&P 500 stocks that are up this year all hail from the energy sector. Clearly, surging oil prices help drive profits. And those profits support highly generous dividend yields.

Take Devon Energy as an example. The Oklahoma City, Okla.-based oil and gas company pays a remarkable 6.2% dividend yield. That’s nearly 400% greater than the yield on the S&P 500. But it turns out the yield is just the tip of the profit-gusher for investors. Just this year, the stock is up nearly 19% to 52.26. That brings its one-year stock gain to 162%.

Williams is another example of the kind of high-dividend stock S&P 500 investors are going for. It not only yields 5.8%, its shares are up nearly 16% this year to 30.08. That caps a one-year 31.7% gain in shares of the Tulsa, Okla.-based energy firm. And get this: Williams adjusted profit per share is seen jumping another nearly 4% in 2022 following an anticipated 14.5% rise in 2021.

Dividends Aren’t Just About Oil

When high dividends are involved, investors seem willing to look past ESG. Philip Morris International continues to dominate thanks to its powerful 4.6% dividend yield.

Big investors might like to say they care about societal values, but they’re taking the dividends paid by tobacco giant Philip Morris to the bank. The stock sports an impressive yield, but it’s also up 15% just this year. It’s not an entirely new phenomenon, either. Shares of Philip Morris are up nearly 27% in a year’s time.

Demand has been strong for tobacco products during the pandemic. The company’s revenue is seen rising another 2.4% in 2022 following a nearly 10% jump in 2021. And profit this year is expected to gain another 3% this year to $6.29 a share. Similarly, shares of alcohol and tobacco seller Altria are up nearly 6% this year. And keep in mind it pays an additional 7.1% dividend yield on top of that.

Dividends are in. But investors have a type that they like. Choose wisely.

Top Performing, High Dividend Paying S&P 500 Stocks

Year-to-date performances of rising stocks yielding 4.5% or higher

Sources: IBD, S&P Global Market Intelligence

Follow Matt Krantz on Twitter @mattkrantz

YOU MAY ALSO LIKE:

Bank Of America Names Top 11 Stock Picks For 2022

MarketSmith: Research, Charts, Data And Coaching All In One Place

12 Stocks Turned $10,000 Into $413,597 In 12 Months

Check Out New IBD Live Panel Discussion

Market Skids Again; Four Stocks In Beat-Up Sector Worth Watching