See which stocks pay the highest dividends.
When looking for the highest dividend paying stocks, investors should start by looking at “dividend yield.” This is a simple calculation that divides the annual payout by the share price. It’s a helpful calculation for income investors, since some stocks trade for much higher share prices and an ostensibly large dividend of a few dollars per share may not actually count for much against the total amount you have invested in that company. Meanwhile, a small dividend of just 10 cents counts for an impressive 10% return on your investment if shares are only $1 apiece. If you’re looking for stocks with the highest dividend yield, here are the seven leading stocks in the S&P 500 that all pay more than 7% back in annual dividends.
Kinder Morgan (ticker: KMI)
Though many energy stocks have been under pressure to cut back on dividends amid the volatility of 2020, energy infrastructure stock Kinder Morgan actually increased its quarterly dividend by 5% this year. Furthermore, while many energy stocks have been forced to take on more debt to get by, KMI has reduced its long-term debt over the last five years even as oil markets have been volatile. As a “midstream” company that is more concerned with storage and pipelines than exploration or refining, KMI is relatively insulated from price volatility and should continue to hang tough and pay big dividends for some time.
Current yield: 7.3%
Williams Cos. (WMB)
Shares of pipeline operator Williams Cos. offer a relatively stable energy investment with a robust dividend. The company generates consistent cash flow thanks to the highly regulated nature of its rates structure and long-term contracts, meaning there’s a degree of reliability to the business model even while other energy firms have faced serious uncertainty in 2020. It’s also worth noting that while the long-term disruption of climate change is very real, the global economy won’t transition away from fossil fuels anytime soon. That means investors can have confidence in WMB for a while — and in the meantime, harvest a tremendous yield.
Current yield: 7.4%
Altria Group (MO)
Altria Group is the company behind Marlboro cigarettes and Skoal chewing tobacco, among other tobacco products, as well as the Chateau Ste. Michelle winery. Collectively, these offer a reliable backbone of revenue, and as stressed-out Americans have indulged a bit more during the pandemic, MO stock has done quite well lately. Altria also has big strategic investments in key growth markets, including vaping products and cannabis, which could serve it well in the future.
Current yield: 8.6%
Exxon Mobil Corp. (XOM)
It’s the understatement of the year to say that Exxon has seen better days. The Big Oil icon lost more than $2 billion across the first nine months of 2020 thanks to both volatility in oil markets as well as long-term pressures on the fossil fuel industry as the global economy responds to climate change. Most recently, Exxon announced a massive write-down between $17 billion and $20 billion of its natural gas fields. This has all weighed heavily on the stock, but investors shouldn’t worry too much as XOM has one of the biggest operations on the planet and a strong balance sheet that will help it weather the short-term pressures on its business.
Current yield: 8.7%
Iron Mountain (IRM)
Iron Mountain is a unique document storage company that has been structured as a real estate investment trust, or REIT. That means it must deliver 90% of its income back to shareholders in the form of big dividends. IRM claims a 98% retention rate of its clients, and internal estimates show around half of its items have been stored for 15 years or more. That makes it tremendously stable and reliable. On top of that, it has recently moved into the digital age with information management and security offerings. While share prices never seem to break out, the dividend alone makes this pick worth a look.
Current yield: 9%
Lumen Technologies (LUMN)
Telecommunications play Lumen, formerly known as CenturyLink, is not a household name for many Americans. This $11 billion player in internet access and related IT services is a bit of a niche business that is tied to a few regions and doesn’t have the nationwide appeal of a Big Telecom player like Verizon (VZ). However, LUMN is increasingly competitive with enterprise internet access for businesses in these markets and includes a suite of cybersecurity tools and IT services to help small organizations thrive without worrying about internal tech support. Lumen is admittedly a smaller player in the space, but its big dividend makes it worth a look.
Current yield: 9.5%
A smaller energy player, Oneok is a natural gas infrastructure company that is focused on tank storage and pipeline transportation. As this business lacks the big risks and price sensitivity of fossil fuel exploration and production, OKE stock tends to be more stable than some other names in the sector. Income investors will take comfort in this stable model, as the pipeline business supports strong cash flows regardless of how cheap or costly a barrel of oil is on today’s market. OKE simply charges a fee for the products it moves, then passes a bit of that on via income to shareholders.
Current yield: 10%
Seven highest dividend paying stocks in the S&P 500:
— Kinder Morgan (KMI)
— Williams Cos. (WMB)
— Altria Group (MO)
— Exxon Mobil Corp. (XOM)
— Iron Mountain (IRM)
— Lumen Technologies (LUMN)
— Oneok (OKE)
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Update 12/03/20: This story was published previously and has been updated with new information.