Andrew Bary

A surprising group of companies now carry some of the highest dividend yields in the S&P 500 index.

The two highest yields at nearly 10% belong to chemical firms Dow and LyondellBasell Industries.

Others in the index's top 20 of biggest dividend yields include Pfizer, Franklin Resources, Invesco, United Parcel Service, and T. Rowe Price. These stocks carry yields from 6% to nearly 8%.

Altria and Verizon Communications, which have been near the top of index's high yielders in recent years, aren't quite so high in the rankings after outperforming the market so far this year as investors favor defensive stocks. Altria shares are up about 10% to $57, and Verizon shares are 7% higher to $43. Altria yields 7% and Verizon, 6.3%.

A longtime member of the high-yielding club, AT&T doesn't even crack the top 20 in the S&P 500 after its 60% gain in the past 12 months to $26, which has dropped its yield to 4%.

Dow and Lyondell shares, by contrast, have been hammered in the past 12 months, with Dow stock down nearly 50% to $29, and Lyondell off about 40% to $57. Dow now yields 9.7% and Lyondell, 9.2%

Both companies are due to report first-quarter earnings this week and should offer an update on their dividend outlooks, but both sounded optimistic about maintaining them on their fourth-quarter earnings calls in early 2025.

On its fourth-quarter earnings call, Lyondell Chief Financial Officer Michael McMurrary said "we are well positioned to extend our track record of growing our dividend in 2025." McMurrary has since retired.

Dow's CEO Jim Fitterling said on its fourth-quarter call that "we are confident in our ability to deliver on all of our capital allocation priorities, including our industry-leading dividend." Dow's annual dividend of $2.80 a share, however, exceeds its projected 2025 earnings of about $1.25 a share.

"Petrochemical demand is faltering, raw material costs are rising, trade risk is increasing, global economic strength is weakening," wrote J.P. Morgan analyst Jeff Zekauskas in a client note in early April.

His view is that Dow is in the more-difficult position because he projects the company won't cover its dividend and capital expenditures from cash flow over a multiyear period. He expects both Dow and Lyondell to maintain their payouts this year, however.

Pfizer's dividend is now 7.7% with the stock around $22, down 17% so far in 202r after recently hitting a 10-year low. Pfizer reports first-quarter results soon, and the company has said it plans not only to maintain the dividend, but raise it.

"We are dedicated to maintaining and growing our dividend and meeting our de-levering targets by the end of 2025, providing for a more balanced capital allocation," said Pfizer Chief Financial Officer David Denton, on the first-quarter conference call. The company's payout ratio is high at 60%, about double that of the S&P 500 index, but not excessive. Altria, for instance, has maintained a payout ratio close to 80%.

Three traditional asset managers -- Invesco, Franklin Resources, and T. Rowe Price -- made the list of top 20 yielders in the S&P 500.

Invesco shares are up 10% Tuesday to $13.65 after reporting a strong earnings report. It posted a 33% increase in adjusted earnings in the first quarter to 44 cents, generated positive flows, and boosted its quarterly dividend to 21 cents from 20.5 cents. The shares of the company, which manages the $300 billion Invesco QQQ Trust exchange-traded fund, now yields 6.2%.

T Rowe Price stock, at around $85, is near an eight-year low and yields 6%. A leader in target-date funds, the company's CEO Robert Sharp said on the first-quarter earnings call: "We continue to prioritize the recurring dividend, while maintaining ample liquidity, support our seed capital program, opportunistic buybacks, and potential M&A and strategic investments."

Franklin, whose shares yield over 7%, didn't address the dividend on its earnings call earlier this year but noted in a regulatory filing: "We currently expect to continue paying comparable regular dividends on a quarterly basis to holders of our common stock depending upon earnings and other relevant factors."

UPS stock now yields nearly 7% with its shares at around $97, down 32% in the past year, and back at trading levels from a decade ago. The company, which reports its first-quarter results soon, has tight dividend coverage with a projected earnings payout of close to 90% this year. Asked on the fourth-quarter call in early 2025 about the dividend, CEO Carol Tome said the payout ratio is above a targeted 50% but that the company has "plenty of liquidity to pay the dividend."

Write to Andrew Bary at andrew.bary@barrons.com

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April 22, 2025 13:18 ET (17:18 GMT)

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