Should You Buy the 3 Highest-Paying Dividend Stocks in the S&P 500?

Dividend-paying stocks are generally powerful performers.
But not all are alike -- some are riskier than others.
Be especially careful with ultra-high-yielders.
10 stocks we like better than Dow ›
It's hard to argue with dividend investing. Many assume dividends are mainly for retirees, and it's true that dividend income can be critically important when you're living on a fixed or semi-fixed income. But pre-retirees can benefit greatly from dividends, too -- for example, that income can be used to buy more stock!
So, if you're hunting for dividend payers for your portfolio, you may be tempted to buy into the highest-paying dividend stocks. Think twice before doing so, though. Here's why, including a look at the three highest payers in the S&P 500.
First, here's why dividend-paying stocks deserve your attention:
Dividend-Paying Status
Average Annual Total Return, 1973-2024
Dividend growers and initiators
10.24%
Dividend payers
9.20%
No change in dividend policy
6.75%
Dividend non-payers
4.31%
Dividend shrinkers and eliminators
(0.89%)
Equal-weighted S&P 500 index
7.65%
Data source: Ned Davis Research and Hartford Funds.
Their outperformance isn't that surprising since dividend payers have generally grown enough to have somewhat reliable income that supports a commitment to a dividend. When you start comparing dividend payers, though, here are some things to keep in mind.
Don't focus just on the amount of the dividend -- for example, favoring a $3 annual payout to a $1 one. To really compare apples to apples, you need to look at the dividend yield. Let's say the $3 payout belongs to a $240 stock. Its yield would be 1.25% ($3 divided by $240). If the $1 payout belonged to a $40 stock, its dividend yield would be 2.5% ($1 divided by $40). You would get more dividend income per dollar spent on the second stock.
That said, though, a very high yield is often a sign of trouble because when a stock's price drops, its yield goes up. So, it can be best to seek relatively high yields, but not necessarily the highest yields you can find. Here's a look at the three highest payers in the S&P 500 as of mid-June.
Shares of Dow (NYSE: DOW) recently sported a whopping dividend yield of 9.8%. Not surprisingly, the stock is down -- recently by more than 40% over the past year. Its five-year average annual gain is 1%, too. That's not pretty, but the dividend yield certainly is fetching.
So, why is the stock down? Well, per my colleague Daniel Foelber, it's facing weak customer demand, global competition, and high costs. Yikes. Such problems don't always last, though, and Dow is working to cut its costs and diversify even further, which can spread its risks across multiple kinds of operations. (It's been investing in recycling plastic waste, for example.)
The company hasn't been generating sufficient cash to cover its dividend payout, so unless things change, it may have to shrink the dividend. But even if the payout is cut in half, a roughly 5% dividend yield would still be way above average.
LyondellBasell Industries N.V. (NYSE: LYB) is another chemical company that has seen its fortunes -- and its share price -- fall. Over the past year, it's down about 31%, and its dividend yield was recently 9.2%.
It, too, isn't generating enough in earnings to cover its dividend yield, so a dividend cut is not out of the question. Interestingly, though, the company announced a (modest) dividend increase in May. So management isn't looking very pessimistic. CEO Peter Vanacker said:
LYB continues to reward shareholders with a strong and growing dividend in 2025, which will mark 15 consecutive years of dividend increases....The growth of our dividend reaffirms confidence in our disciplined capital deployment, our value-driven strategy and our capability to navigate the cycle during these challenging times.
Alexandria Real Estate Equities (NYSE: ARE) is a real estate investment trust (REIT) -- a company that owns many real estate properties, charging its tenants rent. REITs are required to pay out at least 90% of their taxable earnings as dividends, and the dividend yield for Alexandria Real Estate Equities was recently a fat 7.5%.
The company specializes in leasing offices to the life sciences industry, and the fact that many people are working from home these days has put pressure on office real estate. Indeed, this REIT's stock has also fallen hard over the past year -- down nearly 34%.
Founded in 1994, Alexandria describes itself as "the pioneer of the life science real estate niche." The company owns, operates, and develops what it calls "collaborative Megacampus ecosystems in AAA life science innovation cluster locations." These are spread out among such places as Boston, San Francisco, Seattle, Maryland, Research Triangle Park, and New York City.
So, take a closer look at any of these high yielders that interest you, but know that there are plenty of other solid dividend payers out there, many with less murky near-term futures.
Before you buy stock in Dow, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Dow wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $664,089!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $881,731!*
Now, it's worth noting Stock Advisor's total average return is 994% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join .
See the 10 stocks »
*Stock Advisor returns as of June 9, 2025
Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alexandria Real Estate Equities. The Motley Fool has a disclosure policy.
Should You Buy the 3 Highest-Paying Dividend Stocks in the S&P 500? was originally published by The Motley Fool

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Bloomberg

23 minutes ago

• Bloomberg

Fed's Daly Says Central Bank Communication Should Be Flexible

Federal Reserve Bank of San Francisco President Mary Daly said central bankers need to communicate with flexibility at times of uncertainty, given that using strong forward guidance sometimes 'comes with a price.' 'The economy is dynamic, and our communications must match it,' Daly said Sunday in a speech prepared for the Western Economic Association International's 100th Annual Conference. Daly didn't comment on the outlook for the economy or policy in her written remarks, which she also said were not about the Fed's ongoing framework review.

Yahoo

28 minutes ago

• Yahoo

AppLovin (NasdaqGS:APP) Reports Robust Q1 Earnings Despite Price Dip Over Last Quarter

AppLovin reported robust Q1 earnings with sales growth and improved net income, yet it faced a 4% share price decline over the last quarter. The price move contrasts with the broader market's flat performance but can be partly attributed to the substantial goodwill impairment and the securities class action lawsuit filed against the company. Despite these challenges, the ongoing share repurchase program and strategic advancements like Chartboost's new capabilities on the MAX platform may have cushioned the impact. Meanwhile, impending board changes and M&A discussions could introduce new dynamics for the company's future trajectory. AppLovin has 3 warning signs we think you should know about. Trump's oil boom is here — pipelines are primed to profit. Discover the 22 US stocks riding the wave. The recent developments surrounding AppLovin, including the goodwill impairment and class action lawsuit, may introduce uncertainties that weigh on investor sentiment. While these challenges could pressure the company's revenue and earnings forecasts in the short term, the ongoing share repurchase program and strategic investments in AI and global advertising might support long-term growth trajectories. Over a three-year period, AppLovin's total shareholder return was very large, showcasing its resilience and potential for significant value creation. Despite a recent 4% share price decline, the company's one-year performance exceeded the US Software industry's 16.8% return, indicating robust comparative growth. With a current share price of US$304.62 and analysts' price target of US$432.90, the stock remains at a substantial discount, suggesting potential for future appreciation if the company meets earnings projections. Gain insights into AppLovin's historical outcomes by reviewing our past performance report. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NasdaqGS:APP. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@

TechCrunch

28 minutes ago

• TechCrunch

Moratorium on state AI regulation clears Senate hurdle

A Republican effort to prevent states from enforcing their own AI regulations cleared a key procedural hurdle on Saturday. The rule, as reportedly rewritten by Senate Commerce Chair Ted Cruz in an attempt to comply with budgetary rules, would withhold federal broadband funding from states if they try to enforce AI regulations in the next 10 years. And the rewrite seems to have passed muster, with the Senate Parliamentarian now ruling that the provision is not subject to the so-called Byrd rule — so it can be included in Republicans' 'One Big, Beautiful Bill' and passed with a simple majority, without potentially getting blocked by a filibuster, and without requiring support from Senate Democrats. However, it's not clear how many Republicans will support the moratorium. For example, Republican Senator Marsha Blackburn of Tennessee recently said, 'We do not need a moratorium that would prohibit our states from stepping up and protecting citizens in their state.' And while the House of Representatives already passed a version of the bill that included a moratorium on AI regulation, far-right Representative Marjorie Taylor Greene subbsequently declared that she is 'adamantly OPPOSED' the provision as 'a violation of state rights' and said it needs to be 'stripped out in the Senate.' House Speaker Mike Johnson defended the provision by saying it had President Donald Trump's support and arguing, 'We have to be careful not to have 50 different states regulating AI, because it has national security implications, right?' In a recent report, Americans for Responsible Innovation (an advocacy group for AI regulation), wrote that 'the proposal's broad language could potentially sweep away a wide range of public interest state legislation regulating AI and other algorithmic-based technologies, creating a regulatory vacuum across multiple technology policy domains without offering federal alternatives to replace the eliminated state-level guardrails.' Techcrunch event Save $200+ on your TechCrunch All Stage pass Build smarter. Scale faster. Connect deeper. Join visionaries from Precursor Ventures, NEA, Index Ventures, Underscore VC, and beyond for a day packed with strategies, workshops, and meaningful connections. Save $200+ on your TechCrunch All Stage pass Build smarter. Scale faster. Connect deeper. Join visionaries from Precursor Ventures, NEA, Index Ventures, Underscore VC, and beyond for a day packed with strategies, workshops, and meaningful connections. Boston, MA | REGISTER NOW A number of states do seem to be taking steps toward AI regulation. In California, Governor Gavin Newsom vetoed a high-profile AI safety bill last year while signing a number of less controversial regulations around issues like privacy and deepfakes. In New York, an AI safety bill passed by state lawmakers is awaiting Governor Kathy Hochul's signature. And Utah has passed its own regulations around AI transparency.