Highest Dividend-Paying Stocks
For decades, dividend stocks have helped income investors achieve their goals. While the recent surge in the stock market has made dividend yields look less impressive compared to double- or even triple-digit capital gains, dividend-paying stocks still deserve attention. Even with rising interest rates, fixed income products don’t yield that much. For those that want to improve the return on their income portfolios, it is worthwhile to check out some of the highest dividend-paying stocks on the market.
The first thing to note is that the highest-yielding stocks are not necessarily the best dividend stocks. In fact, most of them are not. Think about it: if a company runs a rock-solid business and has a very attractive dividend yield, wouldn’t investors want to invest in it? They would. As the buying activity starts, the stock price of that company would go up. Since the company’s dividend yield moves inversely to its stock price at a given level of payout, a higher stock price means the company’s yield is now lower.
That’s why you don’t see many blue-chip stocks with ultra-high dividend yields. Investors know that these companies are well-established, financially sound, and have been operating for decades. If they offer very attractive yields, investors will rush towards it.
One of the most common reasons why a company can keep having an ultra-high yield is its subdued stock price. And the reason behind that is usually that investors don’t believe the company’s payout is sustainable. I know, dividends are often sticky. The underlying assumption is that a company will be able to keep paying at least its current dividend rate going forward. But there have been more than enough instances when companies cut their payout or halt dividends completely. If you have plenty of reasons to believe that a company’s payout is not sustainable, it’s probably a good idea to stay away from it. Buying an ultra-high yield stock before its dividend is cut can turn out to be a very expensive lesson.
That’s why in this article, I’m going to limit my scope to the highest dividend stocks belonging to the S&P 500 Index. Of course, they are not all going to be safe bets. But with sizable market cap and trading volume, these companies are worth investigating for yield-seeking investors.
Now, let’s take a look at the top 10 high yield dividend stocks in the S&P 500. Note that the average yield of all S&P 500 companies is currently at 2.04%.
List of Highest Dividend-Paying Companies
| Company Name | Stock Symbol | Dividend Yield |
| Frontier Communications Corp | FTR | 12.54% |
| Centurylink Inc | CTL | 8.90% |
| Iron Mount REIT | IRM | 5.94% |
| Mattel, Inc. | MAT | 5.89% |
| Pitney Bowes Inc. | PBI | 5.65% |
| Seagate Technology PLC | STX | 5.28% |
| Welltower Inc | HCN | 5.23% |
| Staples, Inc. | SPLS | 5.16% |
| Ventas, Inc. | VTR | 4.95% |
| Kohl’s Corporation | KSS | 4.82% |
Highest Dividend Stocks 2017
1. Frontier Communications Corp
Frontier Communications Corp (NASDAQ:FTR) is a telecommunications company serving urban, suburban, and rural communities in 29 states. It offers a variety of services to residential customers through its copper and fiber-optic networks, including advanced voice, high-speed Internet, video, and digital protection solutions.
Frontier Communications is the highest-yielding stock among all S&P 500 companies. With a quarterly dividend rate of $0.105 per share, FTR stock has an annual dividend yield of 12.54%. (Source: “Frontier Communications Corporation Declares First-Quarter Dividends,” Frontier Communications Corp, February 15, 2017.)
The thing is though, while the company’s yield looks great, the same cannot be said about its dividend durability. For quite some time, the company has not been able to make a profit. If things don’t improve in the future, FTR stock may be forced to cut its dividends.
Investors have noticed this. In the past 12 months—a period of impressive climb for the S&P 500 index—Frontier Communications stock plunged 22%.
2. Centurylink Inc
Centurylink Inc (NYSE:CTL) also happens to be a telecommunications company. Headquartered in Monroe, Louisiana, the company provides broadband, voice, video data, and managed services over a 250,000-route-mile U.S. fiber network and a 300,000-route-mile international transport network.
Centurylink pays shareholders quarterly dividends of $0.54 per share. That translates to an annual dividend yield of 8.9%, making CTL stock the second-highest yielding stock on the S&P 500.
In 2016, Centurylink experienced a decline in its financials. Operating revenue decreased to $17.5 billion from $17.9 billion in 2015. Net income came in at $1.16 per share for 2016, a significant drop from the $1.58 per share earned in 2015. (Source: “CenturyLink Reports Fourth Quarter and Full-Year 2016 Results,” Centurylink Inc, February 8, 2017.)
The company was paying out more than what it earned. In the past 12 months, Centurylink had a dividend payout ratio of 186.21%.
3. Iron Mount REIT
Iron Mount REIT (NYSE:IRM) provides storage and information management solutions. The company has a network of more than 85-million square feet of space in 1,400 facilities across 46 countries.
IRM stock pays $0.55 per share on a quarterly basis, translating to an annual dividend yield of 5.94%.
The neat thing about Iron Mount REIT is that the company’s financial model is based on the recurring nature of its revenue. This has allowed the company to raise its payout to shareholders. Since the company started paying dividends in 2010, its quarterly dividend rate has increased more than eightfold. (Source: “Historical Dividends,” Iron Mount REIT, last accessed February 16, 2017.)
4. Mattel, Inc.
Mattel, Inc. (NASDAQ:MAT) is a toy manufacturing company headquartered in El Segundo, California. Founded in 1945, Mattel now sells products to over 150 countries around the world. Its portfolio of brands includes “American Girl,” “Barbie,” “Fisher-Price,” “Hot Wheels,” “Monster High,” and “Thomas & Friends,” among others.
The company pays quarterly dividends of $0.38 per share, giving MAT stock a quite handsome dividend yield of 5.89%. However, one of the reasons behind the impressive yield is the downturn in Mattel’s stock price. According to earnings reported last month, its worldwide net sales declined four percent in 2016, while earnings per share (EPS) dropped 16%. Mattel stock has plunged 18% since the earnings release. (Source: “Mattel Reports Full Year And Fourth Quarter 2016 Financial Results And Declares Quarterly Dividend,” Mattel, Inc., January 25, 2017.)
5. Pitney Bowes Inc.
Pitney Bowes Inc. (NYSE:PBI) is a global technology company providing location intelligence, customer information management, customer engagement technology products and solutions. Pitney Bowes has clients around the world, including 90% of Fortune 500 companies.
PBI stock has a quarterly dividend rate of $0.1875 per share, giving it an impressive annual dividend yield of 5.65%.
The company reported earnings earlier this month. In full-year 2016, revenue declined five percent to $3.4 billion, while adjusted EPS slipped four percent to $1.68. (Source: “Pitney Bowes Announces Full Year And Fourth Quarter 2016 Financial Results,” Pitney Bowes Inc., February 1, 2017.)
Still, thanks to its solid free cash flow, the company wasn’t borrowing to pay for its dividends. In 2016, Pitney Bowes’s $197.0 million in share buybacks, $141.0 million in dividends, and $65.0 million in restructuring payments were all paid for in cash.
6. Seagate Technology PLC
Seagate Technology PLC (NASDAQ:STX) is a data storage company headquartered in Cupertino, California. It pays quarterly dividends of $0.63 per share, translating to an annual dividend yield of 5.28%.
Seagate Technology’s dividends have been growing at an impressive pace. In the past 10 years, STX stock’s quarterly payout has increased by more than sixfold.
The company’s bottom line has also been improving to support its higher dividends. According to its most recent quarterly earnings report, Seagate’s adjusted EPS was $1.38, up 68% from the year-ago period. (Source: “Seagate Technology Reports Fiscal Second Quarter 2017 Financial Results,” Seagate Technology PLC, January 24, 2017.)
7. Welltower Inc
Welltower Inc (NYSE:HCN) is a real estate investment trust (REIT) that invests in senior housing, assisted living and memory care communities, post-acute care facilities, and medical office buildings. The company owns more than 1,400 properties in major, high-growth markets in the U.S., Canada, and the U.K.
The company currently pays quarterly dividends of $0.87 per share, with an annual dividend yield of 5.23%. In the past five years, Welltower’s quarterly payout has increased 18%. (Source: “Dividend History,” Welltower Inc, last accessed February 16, 2017.)
Healthcare REITs like Welltower could be great additions to an income investor’s portfolio. The yield looks attractive and the industry could be recession-proof because the demand for healthcare is relatively inelastic to the macroeconomic environment. As more baby boomers enter their golden years, Welltower could continue rewarding shareholders with increasing dividends.
8. Staples, Inc.
Staples, Inc. (NASDAQ:SPLS) is in the office supply retail business. Headquartered in Framingham, Massachusetts, the company has retail stores in North and South America, Europe, Asia, New Zealand, and Australia.
The company pays $0.12 of dividends per share each quarter, giving SPLS stock an annual dividend yield of 5.16%.
Lately, things haven’t going that well at Staples. In the third quarter of 2016, the company’s sales declined four percent year-over-year to $5.4 billion. Adjusted earnings came in at $0.34 per share, compared to $0.35 per share earned in the year-ago period. (Source: “Staples, Inc. Announces Third Quarter 2016 Performance,” Staples, Inc., November 17, 2016.)
In the first three quarters of 2016, Staples closed 35 stores in North America.
9. Ventas, Inc.
Like Welltower, Ventas, Inc. (NYSE:VTR) is a healthcare REIT. The company has a diversified portfolio of nearly 1,300 senior housing and healthcare properties in the U.S., Canada, and the U.K.
The company has quite an impressive track record when it comes to returning value to shareholders. Since 2000, Ventas has delivered compound annual total return to shareholders of 25%, significantly outperforming both the S&P 500 index and the MSCI U.S. REIT index. Right now, it has a quarterly dividend rate of $0.775 per share, or an annual dividend yield of 4.95%.
10. Kohl’s Corporation
Rounding off the list of the highest dividend-paying stocks is Kohl’s Corporation (NYSE:KSS). Kohl’s is a department store retail chain with more than 1,100 stores in 49 states. While the company has been around for more than half a century, it only started paying dividends quite recently. Kohl’s began with a quarterly payout of $0.25 per share in 2011. Now, its payout has doubled to $0.50 per share, giving KSS stock an annual dividend yield of 4.82%.
With the expansion of the e-commerce industry, many retailers have experienced declines in their business, and Kohl’s is no exception. In the months of November and December 2016, the company’s comparable store sales decreased 2.1% year-over-year. (Source: “Kohl’s Corporation Reports November/December Sales and Updates 2016 Guidance,” Kohl’s Corporation, January 4, 2017.)
Disappointing holiday sales triggered a downturn in Kohl’s stock. Year-to-date, KSS stock tumbled nearly 16%.
Final Thoughts on Highest Dividend-Paying Stocks
As I said before, the highest yielding stocks are not always the best dividend stocks. Markets can be efficient. If something is good, investors will notice it. For instance, many investors are willing to pay a premium for stocks with growing payouts, or stocks that pay monthly dividend. Knowing your investment goals and risk profile should help you decide what type of dividend stock is the best for your income portfolio.