Dissecting S&P 500 Dividends: Highest Yielding Stocks
Investors seeking to mitigate their exposure to any pullbacks in the market, may want to consider companies rewarding their shareholders with dividends. As the market rally continues, dividend yields have been falling but there are some companies that are still raising their dividends. This week, tech giant IBM announced that it would raise its quarterly dividend by 10% to 55 cents a share, marking the 14th straight year that the company has increased its payout.
S&P 500 Dividend Breakdown by Sector
A review of the S&P 500 reveals that about 73% of its components are currently paying a dividend, with an average yield of 3.26%, and a median value of 2.60%.
A breakdown of the S&P 500 by sector reveals that telecommunications, utilities, and consumer staples companies, as depicted on the table to the left, have on average the highest dividend yields. The utilities sector has 94% of its components paying a dividend, while the telecoms have the highest average yield of 9.31%.
While the market benchmark has gained 29.7% since its March sixth close, dividends could serve to help minimize any potential pullbacks.
Impact of the Rally
Of course, dividends are not guaranteed. Over the past few months, a number of companies, including CNBC's parent company GE , announced cuts to their dividends. The following chart portrays the distribution of all the companies in the S&P 500, according to their corresponding dividend yields. The chart skews to the left, with fewer companies driving up the overall average. Approximately a quarter of all the companies within the S&P 500 do not pay a dividend. In addition to the dividend cuts, the rally over the past two months has pushed yields down further (Yield = Dividends / Price. As prices rise, yields fall). In the past six weeks, for example, the percent of stocks with dividends yielding less than 2% has jumped over 26%.
The tables on the next few pages depict some of the companies in the S&P 500 with dividend yields north of 4%. The yields on these companies are based on the most recent data from Thomson Reuters. Note that these yields could change, as is the case with Eastman Kodak's announcement today that the company is halting its quarterly dividend.
As always, keep in mind that the information should help you generate ideas, but there is more homework to be done, especially with stocks paying dividend yields above 7%.
Stocks with yields over 8% on the next page
Stocks yielding over 10%