These companies are the highest-yielding dividend stocks in the S&P 500.
Dividend stocks can be an excellent option for investors looking for income, as they regularly pay out a portion of the company’s cash flow directly to investors. The best dividend stocks even raise their payouts over time as the companies and their profits grow. Reinvesting these dividends can help investors compound returns. Unfortunately, dividends are only as good as the companies paying them, making stock selection critical for dividend investors. It’s been a difficult year in the market, but holders of these nine highest dividend-paying S&P 500 stocks have at least received their regular income payments.
Lumen Technologies Inc. (ticker: LUMN)
Lumen Technologies is a U.S. telecommunications company that changed its name from CenturyLink in 2020. Lumen is moving to divest some of its assets, and on Aug. 1, the company completed a $2.7 billion sale of its Latin American operations to Stonepeak. In August 2021, Lumen announced a planned $7.5 billion sale of its traditional telecom business to Apollo Global. Lumen shares are down more than 50% in the past five years, but Morningstar analyst Matthew Dolgin says the company has tremendous potential once it completes its divestitures. He says Lumen shares are undervalued, but the stock requires patience. Morningstar has a “buy” rating and $16 fair value estimate for LUMN stock, which closed at $11.03 on Aug. 1.
Dividend yield (trailing 12 months, or TTM): 9.1%
Altria Group Inc. (MO)
Altria is one of the world’s largest tobacco companies. Morningstar analyst Philip Gorham says Altria is no longer a pure-play cigarette company. Roughly 15% of Gorham’s valuation estimate for Altria comes from the company’s 10.2% stake in alcohol giant Anheuser-Busch Inbev SA (BUD). In addition, the company has acquired both vaping and cannabis assets in recent years, including its stakes in Juul and Cronos Group Inc. (CRON). Gorham says the U.S. cigarette market is in secular contraction, but it remains attractive for now given its profitability. Morningstar has a “buy” rating and $45 fair value estimate for MO stock, which closed at $44.05 on Aug. 1.
Dividend yield (TTM): 8.2%
Pioneer Natural Resources Co. (PXD)
Pioneer Natural Resources is an oil and gas exploration and production company that operates primarily in the Permian Basin in West Texas. CFRA Research analyst Stewart Glickman says Pioneer is increasing Permian production at reasonably low well costs. He says the company’s acquisition of Parsley Energy for more than $7 billion in 2021 helps address Pioneer’s relatively low reserve life relative to peers. Pioneer is certainly benefiting from soaring oil and gas prices in 2022, but Glickman says inflation in oil services costs will likely become a near-term margin headwind. CFRA has a “buy” rating and $295 price target for PXD stock, which closed at $228.10 on Aug. 1.
Dividend yield (TTM): 4.4%
Vornado Realty Trust (VNO)
Vornado Realty Trust is an office real estate investment trust, or REIT, that specializes in redeveloping office towers, retail locations and urban central business district office properties. Morningstar analyst Suryansh Sharma says Vornado and other office real estate owners have been pressured by the remote work environment. Employers are struggling to lure workers back to the office after two years of mostly remote work. Sharma says physical business occupancy will continue to slowly improve but may not recover to pre-pandemic levels anytime soon. Still, Sharma says there is significant value in Vornado shares. Morningstar has a “buy” rating and $43 fair value estimate for VNO stock, which closed at $30.10 on Aug. 1.
Dividend yield (TTM): 7%
Simon Property Group Inc. (SPG)
Simon Property Group is another REIT that owns and operates retail malls, along with community and lifestyle centers. Unfortunately, Simon investors haven’t gotten the post-pandemic recovery they were hoping for so far in 2022. The stock is down 32% year to date as of Aug. 1, making it the worst performer on this list. Bank of America analyst Jeffrey Spector sees the weakness as a buying opportunity for long-term investors. Fortunately, Spector says Simon’s guidance is conservative and it has potential to cultivate organic growth. Bank of America has a “buy” rating and $123 price target for SPG stock, which closed at $108.63 on Aug. 1.
Dividend yield (TTM): 5.7%
Oneok Inc. (OKE)
Oneok is a midstream U.S. oil and gas company that specializes in processing natural gas liquids. Russian supply cuts recently sent natural gas prices soaring to their highest levels since 2008, which is good news for U.S. gas demand. Glickman says there has been an uptick in well completion work in Oneok’s key operating regions, suggesting a new wave of gas processing demand is just around the corner. Glickman says Oneok has a runway for cash flow growth, and plant expansions will generate even more volume. CFRA has a “buy” rating and $76 price target for OKE stock, which closed at $59.12 on Aug. 1.
Dividend yield (TTM): 6.3%
Devon Energy Corp. (DVN)
Devon Energy is a U.S. oil and gas exploration and production company that has taken advantage of soaring energy prices since Russia invaded Ukraine. Devon’s stock is up 39.8% in 2022 as of Aug. 1, making it the top-performing stock on this list. In addition to boosting its dividend, excess cash flow helped Devon fund an $865 million buyout of RimRock Oil and Gas in July. Bank of America analyst Doug Leggate says the RimRock deal may be a hint that larger acquisitions could be coming. Bank of America has a “neutral” rating and $80 price target for DVN stock, which closed at $61.57 on Aug. 1.
Dividend yield (TTM): 4.3%
Kinder Morgan Inc. (KMI)
Kinder Morgan is one of the largest U.S. midstream energy companies and focuses primarily on natural gas and liquids. Kinder Morgan transports 40% of U.S. natural gas volumes, 50% of which is intended for export. Glickman says European shortages should support liquid natural gas demand, and the recent spike in oil prices could also boost demand for associated gas processing and logistics. Glickman says the primary concern for Kinder Morgan investors is a U.S. economic downturn. Kinder Morgan also has room for share buybacks in 2022. CFRA has a “neutral” rating and $20 price target for KMI stock, which closed at $17.90 on Aug. 1.
Dividend yield (TTM): 6.1%
AT&T Inc. (T)
AT&T is a diversified telecommunications, media and technology company. Bank of America analyst David Barden says growing macroeconomic headwinds, cautious management commentary on inflation, expanding consumer payment cycles and accelerating declines in AT&T’s business wireline revenues overshadowed what was otherwise solid fundamental performance for AT&T’s core businesses in the second quarter. Barden says AT&T has positive subscriber growth momentum, including 1.058 million postpaid net subscriber additions in the quarter. AT&T has also streamlined its business by divesting its WarnerMedia assets. Bank of America has a “buy” rating and $25 price target for T stock, which closed at $18.73 on Aug. 1.
Dividend yield (TTM): 8.5%
9 highest dividend-paying stocks in the S&P 500:
— Lumen Technologies Inc. (LUMN)
— Altria Group Inc. (MO)
— Pioneer Natural Resources Co. (PXD)
— Vornado Realty Trust (VNO)
— Simon Property Group Inc. (SPG)
— Oneok Inc. (OKE)
— Devon Energy Corp. (DVN)
— Kinder Morgan Inc. (KMI)
— AT&T Inc. (T)
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9 Highest Dividend-Paying Stocks in the S&P 500 originally appeared on usnews.com
Update 08/02/22: This story was published at an earlier date and has been updated with new information.
