9 Highest-Paying Dividend Stocks in the S&P 500

Remember income?

Jokes aside, the last decade of very low interest rates, plus stock gains that outstripped increases in dividend payments, made it harder for retirement investors to live off income from dividends and interest. The dividend yield of the S&P 500 index is now just 1.5%, down from about 2% for much of the 2010s.

Is there a way to position yourself to reap dividends in this environment? Of course there is.

“Just buying the top yielders is not a good idea,” said Sam Stovall, chief investment strategist at CFRA Research. “You need to look at percentage of profits the company pays as dividends, and the S&P Earnings & Dividends Quality Rankings.”

That doesn’t necessarily mean the top yielders are bad plays, though. Here’s a look at the top nine dividend-paying stocks of the S&P 500:

Lincoln National Corp. (LNC)

Shares of Lincoln tanked after the Philadelphia-area insurer announced third-quarter results that included a $2 billion write-down it blamed on “updated guaranteed universal life insurance lapse assumptions in response to emerging experience, combined with recently validated external industry perspectives.” In other words, it had to change assumptions about a series of issues in its life insurance business, including how long policyholders would retain their universal life coverage as they aged and how long they might live.

The company’s net income, let alone its cash flow, used to easily cover the $300 million-plus it spent on dividends annually. But then, its yield used to be much lower when the stock price was at $75 a share in 2021, compared with around $26 now. With losses continuing into the first quarter of 2023, and the company cutting costs and suspending share buybacks, the dividend could land on a future list of cuttable expenses if Lincoln doesn’t right its ship. On the bright side, the stock has risen since the first-quarter earnings, as executives express confidence in Lincoln’s ability to raise fresh capital, and ride its profitable annuities unit as it refocuses its life insurance business.

Dividend yield: 6.9%

Diamondback Energy Inc. (FANG)

This oil and gas producer from Texas’ Permian Basin focuses primarily on fracking along the Wolfcamp and Spraberry shale formations within Midland basin and the Wolfcamp and Bone Spring formations of the Delaware basin. While the boom-and-bust of the oil and gas industry can lead to volatile payouts, Diamondback also owns midstream assets (the picks and shovels) including 770 miles of crude oil and natural gas gathering pipelines along with an integrated water system.

Diamondback has an elevated trailing dividend due to special dividends paid out as oil and gas prices rose in 2022. It’s also been growing its quarterly dividend from a 40-cent quarterly payout in the first half of 2021 to 80 cents per share in its most recent quarter. The company has been on the rise in July as it approaches its anticipated second-quarter earnings release on July 31.

Dividend yield: 7%

AT&T Inc. (T)

AT&T’s stock has been another messy one, losing more than 25% in the last 12 months to push the yield up to 7.3%.

A disastrous acquisition of Time Warner, spun off at a loss in April of 2022, is one big reason for skepticism about the company’s management. Like Verizon, it’s also playing defense against T-Mobile US Inc. (TMUS), which doesn’t pay a dividend as it bolsters its network and continues to integrate Sprint, which it bought in 2020.

But AT&T spent about $10 billion on its dividend last year, and had more than $35 billion in operating cash flow from continuing operations. It can sustain that payout for as long as executives want, barring a collapse in the wireless market.

Dividend yield: 7.3%

Verizon Communications Inc. (VZ)

Verizon is in a dividend-friendly business, since wireless phones throw off lots of free cash flow. But its shares have been under consistent pressure because of competition from AT&T, also a top dividend payer, and the more growth-focused T-Mobile.

The 7.3% dividend has been inflated by a 26% drop in the price of the company’s shares over the last year, through July 7. And the stock drop made the total return on shares negative, but with the payout requiring less than half of last year’s net income, and earnings close to steady even as spending on 5G networks and other capital projects rises, there’s little reason to suspect the dividend is at risk. However, the company has delayed stock buybacks in order to pay for new wireless licenses. For now, Wall Street’s discussion is more about whether Verizon can hold its position rather than resume quick growth.