Contemplating Purchasing the Top Three Dividend-Yielding Stocks within the S&P 500?
The S&P 500 has seen exceptional growth in the last two years, with a 51% increase, not witnessed since the dot-com era. However, this rise has led to a stretched valuation, causing a decrease in dividend yields. In spite of this, there are still attractive income opportunities within the broad-based index. Here are the three top dividend yields in the S&P 500 currently, along with a look at whether they are worth considering.
1. Walgreens Boots Alliance (Dividend Yield: 9.1%)
Walgreens Boots Alliance had a disappointing performance in 2024, with a 64% drop, and even cut its dividend earlier in the year. The steep decline has pushed the yield to an impressive 9.1%.
The drugstore chain reported a resurgence in pharmacy sales in the fiscal 2025 first quarter, with a 12.7% increase in comparable pharmacy sales. However, overall profits were still down. As long as it can maintain its earnings-per-share (EPS) guidance of $1.40 to $1.80 for the year, the dividend, which amounts to $1 per share, should remain secure. Walgreens could offer significant upside potential if it returns to growth. While it faces challenges, the stock appears to be a buy for income investors.
2. Altria (Dividend Yield: 7.7%)
Altria, the nation's largest tobacco company, has similarly experienced a downturn, after initially rallying in 2024. The business continues to grapple with the decline in smoking, despite gaining interest from investors due to high-yield stocks.
In the first three quarters of 2024, Altria's revenue decreased by 2.5%, but adjusted EPS increased by 1.6%. Even with a solid dividend yield, income investors should look elsewhere if the company's revenue growth stays stagnant.
3. Verizon (Dividend Yield: 6.9%)
Verizon, the telecom giant, offers the third-highest dividend yield on the S&P 500 at 6.9%. Verizon's profits have been flat for several years due to a mature smartphone market, and its 5G rollout was mismanaged, leading to a decrease in market share compared to rivals like T-Mobile US.
While the company's wide profit margins provide a solid foundation, Verizon's large debt load is a concern, creating potential risks and limiting financial flexibility. Additionally, the company is in the process of acquiring Frontier Communications for $20 billion. The dividend yield is appealing, but the company's earnings structure and financial constraints might discourage income investors from considering Verizon as a buy.
In conclusion, the S&P 500 still provides opportunities for income investors despite stretched valuations. Walgreens Boots Alliance presents an intriguing buy opportunity, given the resurgence in pharmacy sales and the potential for growth if adjusted EPS objectives are met. While Altria's dividend yield is attractive, the lack of revenue growth should prompt investors to explore other options for their income needs. Verizon's dividend yield is appealing, yet the stock's underperformance, financial constraints, and considerable debt make it less compelling compared to other S&P 500 income investments.
In the context of the S&P 500's current situation, some investors might consider diversifying their portfolio by investing in high-yield stocks like Walgreens Boots Alliance. With a 9.1% dividend yield, the pharmacy giant's yield was boosted by its disappointing performance in 2024 and subsequent dividend cut.
Given that Altria, the nation's largest tobacco company, is grappling with the decline in smoking, income investors might reconsider this high-yield stock as an option, especially if the company's revenue growth remains stagnant. Altria's dividend yield currently stands at 7.7%.
