The Dividend Yield of the S&P 500 has reached a low not seen in over twenty years. Discover locations offering more substantial yields instead.
The S&P 500 has experienced a significant surge, increasing by an impressive 35% over the past year. Consequently, its dividend yield has declined from 1.7% a year ago to approximately 1.2% currently. This is its lowest level in over 20 years and falls well short of its peak of over 4% during the 2008-2009 financial crisis.
For instance, a $10,000 investment made in the S&P 500 today would generate around $120 in dividend income over the next year. Compare this to the $170 that could be earned from an investment made a year ago with the same amount.
Despite the diminished yields of the S&P 500 and its associated stocks, there are several high-income stocks available for purchase at the moment.
Realty Income
Currently, Realty Income's yield exceeds 5.5% at its current share price. This real estate investment trust (REIT) has sustained 653 consecutive monthly dividends throughout its history and has increased its payouts 127 times since its initial public offering in 1994, including for the last 108 consecutive quarters. Its dividend growth rate is a consistent 4.3% compound annual.
The REIT relies on stable rental income, distributing around 75% of its cash flow to investors via dividends, while retaining the remaining amount for investing in new income-generating properties. Realty Income possesses one of the strongest balance sheets among REIT peers, which secures the foundation of its high-yielding dividend.
Realty Income anticipates increasing its payouts, acquiring additional income-generating real estate and investing approximately $3.5 billion into new properties this year. It also acquired Spirit Realty in a $9.3 billion deal, expanding its cash flow per share by nearly 5% this year. With a vast array of commercial real estate opportunities across the U.S. and Europe, Realty Income has a promising long-term growth trajectory.
Kinder Morgan
At its current share price, Kinder Morgan's dividend yield is almost 4.5%. This natural gas pipeline giant has increased its payouts for seven consecutive years.
Kinder Morgan generates a stable cash flow, with around 68% of its earnings being take-or-pay or hedged, ensuring payment regardless of commodity prices or volumes, and another 27% being fee-based based on variable volumes.
The company distributes slightly over 50% of its cash flow via dividends, while retaining the remainder to fund expansion projects and maintain financial flexibility to purchase shares or make acquisitions. Kinder Morgan currently has more than $5 billion of commercially secured expansion projects in its pipeline, set to come online between now and the end of 2028, providing it with clear growth visibility.
Verizon
Verizon's yield exceeds 6.5% at its current share price. This mobile and broadband giant has increased its payouts annually for 18 consecutive years, holding the longest current streak in the U.S. telecom sector.
Verizon is an impressive cash-generating machine, delivering $26.5 billion in cash flow from operations during the first nine months of this year, comfortably covering its capital spending and dividend payments. It subsequently employed the surplus cash to strengthen its already strong balance sheet.
Verizon is actively investing in expanding its 5G and fiber networks, expected to increase its cash flow in the future. Through its acquisition of Frontier Communications for $20 billion, Verizon has expanded its fiber network and boosted its earnings with at least $500 million in cost savings. Verizon's growth-related investments will enable it to continue boosting its high-yielding dividend in the coming years.
These income stocks, with yields surpassing the average stock in the S&P 500, have robust dividend growth records and appear likely to maintain their streaks, making them excellent choices for income-focused investments at present.
Given the current circumstances where the S&P 500's dividend yield has declined due to its increased value, investing in high-yield stocks like Realty Income, Kinder Morgan, and Verizon could be beneficial. For instance, Realty Income offers a yield of over 5.5%, while Kinder Morgan and Verizon have yields of almost 4.5% and over 6.5%, respectively. These companies have a strong track record of increasing their dividends year after year, making them attractive options for those seeking income-focused investments.
