For some investors, regular dividend income is why they’re in the game. That’s why high-yield dividend stocks are often coveted. They can be great low-risk, hassle-free investments.
Earlier generations have favored dividend investing because generally higher yields were on offer then. Today, though, some investors have become more dedicated to high-flying growth stocks. That’s because many yields are not what they used to be. Investors have noticed. So, in many ways, it makes sense that current investors are typically geared toward these securities rather than boring, old dividend stocks. Still, the crucial thing to note here is that, at the heart of it, dividend stocks are a safe investment.
This list is comprised of businesses that are worth billions of dollars and generate robust bottom- and top-line growth. Moreover, these are well-established names with strong histories of dividend growth. Even if they don’t set the markets on fire, they are exactly the kinds of companies that can be vital to your portfolio.
Before we dive deep into these names, though, it’s also important to recognize that this list is curated by dividend yield. That means that instead of looking at the highest dividend by dollar amount, the yield was given preference. This is because it offers the most efficient way to earn a return.
So, without further ado, here are seven of the highest-yielding dividend stocks in the S&P 500:
- AT&T (NYSE:T)
- Kimberly-Clark (NYSE:KMB)
- Crown Castle International (NYSE:CCI)
- Pepsico (NASDAQ:PEP)
- Iron Mountain (NYSE:IRM)
- JPMorgan Chase (NYSE:JPM)
- Target (NYSE:TGT)
Dividend Stocks to Buy: AT&T (T)
Dividend yield: 6.99%
The lack of love for AT&T seems astounding at times. As the world’s largest telecommunications company, this name has outstanding fundamentals and is consistently one of the best dividend-paying stocks in the S&P 500. However, price momentum has not followed. Still, though, the company has emphasized rewarding investors with regular dividend income rather than reinvesting into business operations — a strategy that has confounded analysts but pleased stockholders.
However, the important thing to note is that AT&T is one of the most diversified companies out there. It continuously adds to its revenue streams with an aggressive M&A blueprint. For example, just under three years ago, the company merged with Time Warner in an $85 billion acquisition.
This month, the telecom giant also announced a deal to merge its content unit WarnerMedia with Discovery (NASDAQ:DISCA) in order to take on media giants like Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS). AT&T will get “$43 billion in a combination of cash, debt securities and WarnerMedia’s retention of certain debt.” In addition, T stock shareholders will control 71% of the outstanding share capital of the new entity.
This spin-off will create two much stronger companies; a telecom giant concentrated on 5G as well as broadband and a sprawling media giant that includes HBO, CNN, TBS, HGTV, Food Network and more.
Importantly, a dividend cut next year will reduce the company’s total dividend payout to an estimated $8 billion after the deal closes, down from approximately $15 billion last year. However, even if this happens, the payout is still one of the most attractive in the broader S&P 500. So, don’t push this name off your portfolio because of the impending cut.
Dividend yield: 3.45%
Next up on this list of high-yield dividend stocks is Kimberly-Clark — exactly the kind of entry that you want to see on a list of dividend consumer stocks. This company is involved in the personal care business, mostly making paper-based consumer products like diapers, baby wipes, tissues, toilet paper and paper towels. KMB sells its products through supermarkets, drugstores and other retail outlets.
Of course, no prizes for guessing why this company is doing well. Generally, KMB keeps generating steady profits no matter the wider economic environment. However, we are not here to talk about the business’s consistent earnings performance.
Instead, the dividend is why KMB stock earns top marks from me; stockholders can now celebrate 49 consecutive years of dividend hikes. This makes Kimberly-Clark one of the S&P 500’s Dividend Aristocrats, an exclusive category of companies that have increased dividends for at least 25 consecutive years.
That said, the one concerning element for investors here might be the positive momentum. So far in 2021, KMB stock is flat. However, that is to be somewhat expected since it is a relatively boring consumer defensive stock. All in all, with traditional investment stocks making a comeback, these shares are good to have.
Dividend Stocks to Buy: Crown Castle International (CCI)
Dividend yield: 2.86%
It was only a matter of time before real estate investment trusts, or REITS, became a part of this article. If you’re unaware, a REIT is required by law to distribute 90% of its taxable earnings in the form of payouts. That makes these investment vehicles the ideal fit for any income investor’s portfolio.
In CCI stock’s case, though, there’s another reason to park your capital here: the niche of the market in which it operates. More specifically, Crown Castle International owns, operates or leases more than 40,000 cell towers which span every major U.S. market.
Basically, the infrastructure here connects communities and businesses to wireless services nationwide. So, with cellphone usage increasing every year and the growing need for more 5G networks, this REIT is set up for explosive growth in the coming years. That makes this pick of the dividend stocks a no-brainer in my book.
Dividend yield: 2.91%
Next up on this list of dividend stocks is Pepsico, one of the largest multinational food, snack and beverage companies in the world. As you probably already know, this name has impressive diversification across many geographies and business segments. It has also had consistent top-line growth in the last five years.
Now, you may be asking why I am not recommending Coca-Cola (NYSE:KO) here instead — the world’s other big beverage giant as well as PEP’s main rival. On its own, Coca-Cola is a great stock which has rewarded shareholders immensely for their initial investment. However, Pepsico is more diversified in terms of its segments. For instance, although the company’s Frito-Lay North America division has not beat the contributions of its Pepsico Beverage North America segment, there is not much between them.
So, combining this diversification with a 2.91% dividend yield, PEP stock essentially has all the makings of a steady, solid and attractive long-term performer.
Dividend Stocks to Buy: Iron Mountain (IRM)
Dividend yield: 5.66%
This next entry on my list of high-yield dividend stocks is another REIT. However, Iron Mountain operates in storage and information management services rather than country-wide cell towers. The bulk of IRM’s revenue comes from its storage business, with the rest coming from value-added services. More specifically, this REIT helps store and protect “billions of valued assets, including critical business information, highly sensitive data, and cultural and historical artifacts.” The company serves over 225,000 organizations worldwide.
Due to the nature of its business, this name has managed to record excellent fundamentals in the last five years. For example, sales have increased 6.7% over that period while diluted earnings per share (EPS) has surged 10.4%.
For the past 12 months, IRM stock is up almost 80%. This is because Iron Mountain services high-growth sectors, which has helped it climb substantially in the past year unlike other entries on this list. Currently, IRM has also outperformed the S&P 500 by 38% in the past year.
All in all, IRM stock is a good mix of price momentum and payout — a rare combination.
JPMorgan Chase (JPM)
Dividend yield: 2.20%
Overall, big banks did not have a great 2020. As interest rates plunged, the spread — or the difference between the interest rate that a bank charges a borrower and the interest rate that a bank pays a depositor — narrowed substantially.
However, interest rates are now treading higher in the early parts of 2021. As a result, JPMorgan and other banks have started to recover. In its latest quarterly report, JPMorgan saw a 25% increase in trading revenue. Additionally, deposits rose by 32% and assets under management grew 28% to $2.8 trillion as the investment bank beat both revenue and earnings estimates.
All throughout these wild swings in fortune, however, one thing about JPM stock remained absolutely rock solid: the payout. JPMorgan has hiked its dividend for eight years consecutively. Plus, the payout ratio of almost 28% means there is plenty of room to grow the distribution with this pick of the dividend stocks.
Dividend Stocks to Buy: Target (TGT)
Dividend yield: 1.21%
Last up on this list of dividend stocks, Target — alongside other retailers like Best Buy (NYSE:BBY) and Walmart (NYSE:WMT) — had an excellent 2020 due to the pandemic. In fact, the company has reported blockbuster numbers throughout the crisis and its latest quarter was no exception. For example, comparable sales increased by 22.9% in the first quarter. Most of that was attributable to its physical stores, as well as complemented by sustained online growth.
On top of this, visits to stores increased 17% year over year (YOY). This is great news, reaffirming the fact that shoppers are returning to normal consumer behavior. On an earnings call with Wall Street analysts, CEO Brian Cornell said the following:
“With vaccinations rolling out across the country and consumers increasingly comfortable venturing out, we’ve seen an enthusiastic return to in-store shopping.”
Nevertheless, the company’s focus on digital sales has greatly helped the top line in recent years. Moreover, the recent pandemic has highlighted how important it is to have a strong online presence. As such, TGT stock deserves top marks for investing in its digital infrastructure.
Plus, with substantial earnings growth and a dividend payout of 22.19%, this name’s dividend is not in danger of getting cut anytime soon.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.