The stock market, shocked by Federal Reserve policy changes to fight inflation, has been hit this year by growth and technology companies that have suffered the brunt of the biggest falls. Dividend stocks, on the other hand, have risen.
Below is a screenshot of the components of the S&P 500 High Yield Index that are expected to increase quarterly dividend payments to the maximum over the next two years. Current dividend yields are not necessarily very high. But a rapid increase in payments can bode well for overall performance, as the increases imply healthy cash flow trends.
First, look at this comparison of total returns (with reinvested dividends) for the SPDR S&P 500 High Dividend ETF SPYD portfolio,
and the SPDR S&P 500 ETF SPY,
:
Set of facts
This performance of the high-dividend group, a total return of 3.5% this year through May 24, has been unimpressive when you consider that the S&P 500 has fallen 17.1%.
High Yield Index Components
Starting with the full S&P 500 SPX,
S&P Dow Jones Indices lowers the list to 80 shares with the highest indicated dividend yields for the next 12 months. The High Yield Index rebalances every six months.
Click here for a description of the S&P Dow Jones Indices S&P 500 High Yield Index, and then click on the fact sheet and methodology for more information.
Provision of dividend shares
The components of the S&P 500 High Yield Index have dividend yields ranging from 1.98% (Baker Hughes Co. BKR,
) at 8.42% (Lumen Technologies Inc. LUMN,
(Lumen had been known as CenturyLink until it was renamed in September 2020. The company reduced dividend payments by more than 50% in February 2019, which shows that investors need to research more , especially if a stock has a very high current (yield).
In comparison, the S&P 500 has a weighted dividend yield of 1.63%, according to FactSet.
Higher expected dividend increases
The following are the 15 companies in the S&P 500 High Yield Index that are expected to increase their annual dividend payments further by 2024, according to consensus estimates among analysts surveyed by FactSet:
|
Company |
Ticker | Current dividend yield | Current annual dividend rate | Estimated dividend – 2023 | Estimated dividend – 2024 | Estimated increase in dividend in two years |
|
EOG Resources Inc. |
EOG, |
2.32% |
$ 3.00 |
$ 3.09 |
$ 5.72 |
47.6% |
|
PPL Corp. |
PPL, |
2.68% |
$ 0.80 |
$ 1.03 |
$ 1.10 |
27.0% |
|
M&T Bank Corp. |
BTT, |
2.84% |
$ 4.80 |
$ 5.34 |
$ 6.27 |
23.5% |
|
Regions Financial Corp. |
RF, |
3.33% |
$ 0.68 |
$ 0.79 |
$ 0.87 |
22.3% |
|
Omnicom Group Inc. |
WTO, |
4.03% |
$ 2.80 |
$ 3.18 |
$ 3.51 |
20.3% |
|
Baker Hughes Company Class A |
BKR, |
1.98% |
$ 0.72 |
$ 0.78 |
$ 0.89 |
18.9% |
|
Amgen Inc. |
AMGN, |
3.08% |
$ 7.76 |
$ 8.32 |
$ 9.52 |
18.5% |
|
PrInc.ipal Financial Group Inc. |
PFG, |
3.64% |
$ 2.56 |
$ 2.82 |
$ 3.10 |
17.5% |
|
Citizens Financial Group Inc. |
CFG, |
4.03% |
$ 1.56 |
$ 1.72 |
$ 1.88 |
17.0% |
|
Welltower Inc. |
WELL, |
2.76% |
$ 2.44 |
$ 2.64 |
$ 2.92 |
16.4% |
|
Viatris Inc. |
VTRS, |
4.16% |
$ 0.48 |
$ 0.50 |
$ 0.57 |
15.8% |
|
Sales Inc. |
VTR, |
3.20% |
$ 1.80 |
$ 1.98 |
$ 2.13 |
15.5% |
|
Huntington Bancshares Inc. |
HBAN, |
4.62% |
$ 0.62 |
$ 0.67 |
$ 0.73 |
15.4% |
|
Altria Group Inc. |
MO, |
6.80% |
$ 3.60 |
$ 3.98 |
$ 4.25 |
15.3% |
|
Citigroup Inc. |
C, |
3.87% |
$ 2.04 |
$ 2.20 |
$ 2.40 |
15.1% |
|
Source: FactSet |
||||||
Click on the tickers for more information about each company.
Read Tomi Kilgore’s detailed guide to the vast amount of information for free on the MarketWatch budget page.
A look back at the last five years shows that three of the previous companies have cut their dividends:
-
PPL Corp. PPL,
+ 0.27%
reduced its pay by 52% in February. -
Welltower Inc. WELL,
+ 0.60%
reduced its dividend by 30% in August 2020. -
Sales Inc. VTR,
+ 2.26%
it reduced its dividend by 43% in August 2020.
Higher current dividend yields
These 15 companies in the S&P High Dividend Index have the highest dividend yields. Based on consensus estimates for payments until 2024, two are expected to reduce their dividends:
|
Company |
Ticker | Current dividend yield | Current annual dividend rate | Estimated dividend – 2023 | Estimated dividend – 2024 | Estimated increase in dividend in two years |
|
Lumen Technologies, Inc. |
WORLD, |
8.42% |
$ 1.00 |
$ 0.88 |
$ 0.91 |
-10.3% |
|
Altria Group Inc. |
MO, |
6.80% |
$ 3.60 |
$ 3.98 |
$ 4.25 |
15.3% |
|
Simon Property Group Inc. |
SPG, |
6.31% |
$ 6.80 |
$ 7.14 |
$ 7.48 |
9.0% |
|
Vornado Realty Trust |
A LA U |
6.25% |
$ 2.12 |
$ 2.27 |
$ 2.30 |
8.0% |
|
ONEOK Inc. |
OK, |
5.87% |
$ 3.74 |
$ 3.82 |
$ 3.94 |
5.0% |
|
Kinder Morgan Inc. Class P |
KMI, |
5.80% |
$ 1.11 |
$ 1.15 |
$ 1.20 |
7.2% |
|
AT&T Inc. |
T-USA |
5.25% |
$ 1.11 |
$ 1.11 |
$ 1.07 |
-3.5% |
|
Verizon Communications Inc. |
VZ, |
5.05% |
$ 2.56 |
$ 2.64 |
$ 2.70 |
5.0% |
|
International Business Machines Corp. |
IBM, |
4.93% |
$ 6.60 |
$ 7.03 |
$ 7.13 |
7.5% |
|
Newell Brands Inc. |
NWL, |
4.89% |
$ 0.92 |
$ 0.92 |
$ 0.93 |
0.7% |
|
Iron Mountain Inc. |
IRM, |
4.82% |
$ 2.47 |
$ 2.55 |
$ 2.64 |
6.1% |
|
Prudential Financial Inc. |
PRU, |
4.76% |
$ 4.80 |
$ 5.10 |
$ 5.45 |
11.9% |
|
Williams Cos. Inc. |
WMB, |
4.69% |
$ 1.70 |
$ 1.78 |
$ 1.86 |
8.7% |
|
Philip Morris International Inc. |
PM, |
4.69% |
$ 5.00 |
$ 5.26 |
$ 5.45 |
8.2% |
|
Huntington Bancshares Inc. |
HBAN, |
4.62% |
$ 0.62 |
$ 0.67 |
$ 0.73 |
15.4% |
|
Source: MarketWatch |
||||||
Therefore, two of the highest performing stocks in the S&P 500 High Yield Index are expected to reduce payments. Over the past five years, these companies have reduced their dividends:
-
Lumen Technologies, under its previous name, CenturyLink, reduced its dividend by 54% in February 2019.
-
Simon Property Group Inc. SPG,
+ 1.24%
reduced its dividend by 38% in June 2020. -
Vornado Realty Trust VNO,
+ 2.06%
most recently, it reduced its payment in June 2020 by 19%. -
AT&T Inc. T,
+ 0.66%
it reduced its dividend by 47% in March, in connection with its split from WarnerMedia.
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