Banking

7 Stocks Paying Super-Size Dividends Are Actually Doing Great

What’s the use of an S&P 500 stock paying a giant dividend — like AT&T (T) — if you’re only going to miss out on price gains? Luckily some high-yield stocks are rising, too.




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All told, seven stocks in the S&P 500 yielding 5% or more, including mostly energy firms like Oneok (OKE) and Exxon Mobil (XOM) but also communications services play Lumen Technologies (LUMN) are also up 25% or more this year so far, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

That easily tops the S&P 500, which yields just 1.4% and is up 19% this year so far.

“S&P 500 dividends are back, as record earnings, sales, and margins have permitted companies to return to the business of returning shareholder wealth,” said Howard Silverblatt, earnings strategist at S&P Dow Jones Indices.

Avoiding The AT&T Effect

Don’t think it’s possible to lose money on a dividend paying S&P 500 stock this year? It’s surprisingly common.

More than 70 S&P 500 companies, or nearly 15% of the index, dropped in value enough this year to completely wipe out their annual dividend. And AT&T is this year’s posterchild of the dangers of chasing yield. Anyone tempted by its seemingly rich dividend yield got burned.

Yes, the struggling telecom company yielded more than 7% at the start of the year. And that’s more than four-times greater than the S&P 500 dividend yield going into 2021. But chasing AT&T’s seemingly fat yield is costly.

Shares of AT&T are down more than 10.5% this year so far. That decline completely wiped out AT&T’s dividend for the entire year. And it leaves investors who bought in January in the red by 3.5%. Should you buy AT&T stock now?

Fortunately, though, there are places in the S&P 500 investors got big price gains on top of their dividends.

S&P 500 Energy: Big Gains To Go With Huge Dividends

Energy is punching over its weight in the S&P 500 in both dividends and stock gains.

Five of the seven S&P 500 companies yielding 5% or more — that are beating the index — are all in the S&P 500. And it’s turning into a lucrative sector, although it’s only roughly 3% of the S&P 500.

Take Oneok, for instance. The Tusla-based natural gas processor is now yielding 5.79%. That’s more than triple the yield on the S&P 500. But it’s not merely a big dividend story. Shares are also up a blistering 69.6% this year. Additionally, analysts think the company will make 82 cents a share in the third quarter. That’s up more than 17% from the same year-ago period. No wonder the stock carries a lofty 97 IBD Composite Rating.

But it’s a similar story across energy firms. Exxon Mobil, Williams (WMB), Valero Energy (VLO) and Kinder Morgan (KMI) all yield north of 5% and are soaring. Exxon Mobil, one of the largest of the bunch, yields 5.6%. And the stock is still up 52.1% this year.

Not Just Energy, Though

If you’re looking for price gains and big dividends, energy isn’t the only game in town.

Lumen, a telecommunications company in Louisiana, shows the point. It’s yielding north of 8%, which is even more than AT&T paid earlier in the year. And yet, its stock price is still up more than 24% this year in addition.

So the bottom-line: Don’t settle for lackluster gains with your dividends. You don’t have to.

Big S&P 500 Dividends And Stock Gains, Too

Stocks yielding 5% or more that gained 20% or more this year

Company Ticker Stock YTD % ch. Dividend yield Sector Composite Rating
Oneok (OKE) 69.6% 5.79% Energy 97
Iron Mountain (IRM) 52.4 5.52 Real Estate 85
Exxon Mobil (XOM) 52.1 5.61 Energy 83
Williams Companies (WMB) 47.9 5.58 Energy 95
Valero Energy (VLO) 39.2 4.95 Energy 75
Kinder Morgan (KMI) 35.3 5.88 Energy 94
Lumen Technologies (LUMN) 24.3 8.18 Communication Services 48
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz

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