By the Numbers

Dissecting S&P 500 Dividends: Highest Yielding Stocks

Dividend yields in the S&P 500 are down since late June, as a 6% rally for the US equity index this month has pushed yields lower, and companies remain cautious about increasing their dividend payouts.

A review of the S&P 500 reveals that about 73% of its components are currently paying a dividend, with an average yield of 2.7%, and a median value of 2.25%. The current average yield represents a 25-basis point drop from the previous figure in late June, while the median value has gone down 22-basis points.

According to Standard & Poor's, a record low 223 of the ~7,000 publicly owned corporations that report dividend information to S&P increased dividend payments during the second quarter of 2009.  The number of companies reporting dividend increases dropped by 49% during the months of April-June this year compared to the same period in 2008. 

In comparison, 250 companies announced dividend cuts during the second quarter of 2009, the highest number since the second quarter of 1957.  The drop in dividend payments, which represents a significant portion of investors' income, was reduced by approximately $77 billion during the first quarter of 2009.

Historically, from December 1936 to March 2009 the average yield of the S&P 500 was 3.8414%, in addition, the benchmark index's annualized return per year stood at 9.51% from January 1926 to March 2009, according to Standard & Poor's statistics. 

Despite the difficult economic times, various companies continue to reward their shareholders with dividend payments.  Clorox and Walgreen , for example, are among the companies that recently announced increases to their dividend payouts. 

Walgreen, a retail drug store chain, said on July 8 that its board raised its quarterly dividend 22.2% to 13.75 cents a share.  Clorox, a manufacturer of consumer products, also lifted its quarterly dividend by 9% in early June to 50 cents per share.

Dividend investors seeking insight into where some of the highest yielding stocks reside could find guidance by looking at the major S&P sectors. 

A breakdown of the S&P 500 by sector shows that telecommunications, utilities, and consumer staples companies, as depicted on the table to the left, have on average the highest dividend yields.  Currently, about 94% of the companies in the the utilities sector pay a dividend with an average yield of 4.80%, while telecom companies have the highest average yield at 9.24%.  

Impact of the Rally

The markets rebound from their March lows has pushed yields down further (Yield = Dividends / Price.  As prices rise, yields fall). Since mid March, for example, the percent of stocks with dividends yielding less than 2% has jumped 46%. As displayed on the chart below, approximately 86% of companies in the S&P 500 have yields less than 4%, with fewer companies driving up the overall average.  Also note that approximately a quarter of all the companies within the S&P 500 do not pay a dividend. 

The following chart portrays the distribution of all the companies in the S&P 500, according to their corresponding dividend yields.

The tables on the next few pages depict some of the companies in the S&P 500 with dividend yields north of 3%. The yields on these companies are based on the most recent data from Thomson Reuters.  Note that dividends are not guaranteed, as has been the case with many companies in the past six months, either raising or halting dividend payouts. 

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 6% on the next page

Stocks yielding over 6%

Stocks yielding 4-6%

Stocks yielding 4-6%

Stocks with yields between 3-4%

Stocks yielding 3-4%:

Data Source:  Thomson Reuters