Go for big income investments with large dividend yields.
When it comes to dividend stocks, many investors are only interested in the larger and more established companies out there that pay back their shareholders. That’s because, while you can find some high-yield offerings in the smaller sections of Wall Street, the stability and scale that comes from major players adds peace of mind to income-oriented investors who are looking at investing in terms of years or decades instead of days or weeks. This “set it and forget it” approach can be very valuable in the long run, particularly when you stake out a position that pays you 5% or more in annual dividends over that extended holding time. The following stocks are the nine highest dividend-paying stocks in the S&P 500 right now, ranked in ascending order and all paying at least 5%.
Iron Mountain Inc. (ticker: IRM)
S&P 500 dividend stock Iron Mountain was established back in the early 1950s to serve as a physical document storage and archiving company. That existing business line remains, but in a digital age Iron Mountain has also moved on to focus on data management and cybersecurity offerings for its clients. These are important services for many businesses, as they are akin to insurance premiums paid to protect operations, and as such Iron Mountain enjoys very reliable revenue to fuel a steady dividend payment. What’s more, payouts have surged from about 25 cents quarterly in 2014 to nearly 62 cents at present for a growth of roughly 150% in distributions. That’s on top of share appreciation of more than 50% so far in 2021, making IRM one of the more appealing high dividend-paying stocks right now.
Dividend yield: 5.5%
Exxon Mobil Corp. (XOM)
One of several large U.S. energy stocks that you’ll find on this list of top-yielding S&P components, Exxon should be well-known to all investors. The Big Oil giant traces its corporate roots back to the 1870s, boasts a market capitalization of about $270 billion and has more than 22,000 operating oil and gas wells worldwide. In the age of climate change you may think a fossil fuel company isn’t a great bet, but the reality is that any long-term transition to a sustainable global economy won’t disrupt short-term demand for oil and gas. And with a generous $3.48 dividend per share annually that accounts for about 65% of next year’s projected profits, income-oriented investors can continue to bank on a nice XOM payday for some time, based on current trends.
Dividend yield: 5.6%
The Williams Companies Inc. (WMB)
With a market capitalization of roughly $36 billion, Williams isn’t a super high-profile energy stock like Exxon. It’s also a slightly different flavor of company, focused on so-called “midstream” operations including transportation of fossil fuels via pipeline as well as the operation of massive storage and processing facilities. But the narrative is quite similar as Williams depends on fossil fuels — and contrary to pledges for long-term emission reduction, 2021 is seeing a rebound in oil and coal use. And as long as end-users are taking delivery of these energy sources, that means Williams can charge a decent fee along the way to power its $1.64 annual dividend. All told, this payday adds up to almost five times the typical S&P 500 dividend payment based on current yields.
Dividend yield: 5.7%
Oneok Inc. (OKE)
Another midstream energy company and top S&P 500 dividend stock, Oneok engages in processing, storage and transportation of natural gas in the United States. And as natural gas is seen as one of the “cleanest” fossil fuels when compared with coal or crude oil, there has been strong demand for this energy source as a bridge between the current energy consumption trends and those of a low-carbon future. Of course, this has resulted in a huge spike in demand — so much so that OKE has surged 130% in the last 12 months. On top of that big share appreciation, this natural gas play also offers a generous and reliable dividend that makes it worth a look from long-term investors, too.
Dividend yield: 5.7%
PPL Corp. (PPL)
Mid-Atlantic electricity provider PPL has been in transition over the last year or two, including selling off its U.K. utility business for $10.5 billion and restructuring operations. However, the company put that capital to good use to pay down some of its debt and focus more on domestic electric utility operations including across its Rhode Island footprint. This ultimately will make for a more focused and reliable operation, and considering PPL has increased its annual dividend at least once a year for roughly a decade running, income investors looking to the long term may want to stake out a position in 2021 and hang on for years to come.
Dividend yield: 5.8%
Kinder Morgan Inc. (KMI)
In case you thought we were done with high-yield energy stocks, another S&P 500 component that has been paying out big dividends lately is KMI. Kinder Morgan is an energy infrastructure company that mainly operates pipelines, processing facilities and storage terminals for various energy commodities including gasoline, diesel fuel, chemicals, ethanol and various petroleum products. The same tail wind that has lifted many other energy stocks in the S&P has helped KMI in 2021, lifting shares an impressive 35% or so year to date on top of the stock’s very generous quarterly payout.
Dividend yield: 5.9%
Altria Group Inc. (MO)
Altria is the U.S.-focused arm of what used to be Philip Morris, and is the tobacco giant behind top cigarette brands including Marlboro, cigars principally under the Black & Mild nameplate and smokeless tobacco products including Copenhagen and Skoal. Altria has also made strategic investments in vaping giant Juul and in cannabis products upstart Cronos Group to help the company tap into customers of the future. Big Tobacco doesn’t exactly conjure up the idea of growth and dynamism, but MO is a slow-and-steady stock that has proven to be a well-run and resilient operation. Case in point: Its $3.60 annual dividend remains comfortably under its projected $4.85 in earnings per share next fiscal year, meaning the income potential of this stock is still vibrant, even if its products are admittedly hazardous to your health.
Dividend yield: 7.5%
AT&T Inc. (T)
Big Telecom stock AT&T is valued at roughly $180 billion at present and is as solid an investment as you can come by. The company has strong underlying financials and an entrenched U.S. business that isn’t easily disrupted thanks to the highly regulated nature of telecommunications services and the very expensive price tags associated with maintaining 5G infrastructure. The downside, if there is one, is that with a near duopoly alongside Verizon Communications Inc. (VZ) there is admittedly not much growth left in the saturated U.S. wireless market. Investors should be aware that AT&T’s effective dividend yield is expected to meaningfully fall in mid-2022, when its spinoff of WarnerMedia and WarnerMedia’s subsequent merger with Discovery Inc. (DISCA, DISCB) is expected to close. The new company is unlikely to pay a dividend, while the slimmed-down telecom-focused AT&T is expected to slash annual dividend payments from about $15 billion to the $8 billion to $9 billion range.
Dividend yield: 8.1%
Lumen Technologies Inc. (LUMN)
Another telecom stock and the top S&P 500 dividend stock from a yield perspective, Lumen is the final noteworthy income play in this major U.S. index. The company recently rebranded itself from CenturyLink, but if you don’t recognize either name that’s probably because this smaller communications company has under 5 million broadband internet subscribers and a legacy business of phone landlines — it’s not terribly large. The company has done its best to expand and stay relevant through buying other firms, but it remains very much on the outside of Big Telecom and looking in. Still, with a massive dividend yield that is the best in the S&P at present, the smaller but generous LUMN could still be worth a look if you’re not afraid of it getting squeezed out by larger competitors.
Dividend yield: 8.3%
Nine highest-paying dividend stocks in the S&P 500:
— Iron Mountain Inc. (IRM)
— Exxon Mobil Corp. (XOM)
— The Williams Companies Inc. (WMB)
— Oneok Inc. (OKE)
— PPL Corp. (PPL)
— Kinder Morgan Inc. (KMI)
— Altria Group Inc. (MO)
— AT&T Inc. (T)
— Lumen Technologies Inc. (LUMN)
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Clarification 10/21/21: A previous version of this article omitted information about AT&T’s expected future dividend cut. The company expects to significantly cut its dividend when its spinoff of WarnerMedia and WarnerMedia’s subsequent merger with Discovery Inc. is expected to close in mid-2022.