Coming into 2025 there was much to like about an S&P 500 stock yielding 5%. How things have changed — and fast.
Eleven S&P 500 stocks, including Dow, LyondellBasell and Warren Buffett-owned Kraft Heinz, started the year tempting investors with plump yields of 5% or more before trouble started. But since then, all these stocks have fallen by 5% or more — wiping out a full year's worth of dividends and then some, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge.
These are just the latest cautionary tales of the risk of chasing yield. It's a good reminder, too, as investors look to lock in decent interest rates ahead of any rate cuts. Investors are pricing in a nearly 75% chance the Federal Reserve will cut rates in the upcoming meeting next month, says the CME Fed Watch tool.
"Investors are looking for assurance from (Fed Chairman Jerome) Powell that a rate cut is likely at the September meeting, in order to help prevent any further weakening of the labor market," said Rick Gardner, chief investment officer, RGA Investments.
Buffett Got Burned
Buffett wins more than he loses, but his Berkshire Hathaway stake in food maker Kraft Heinz isn't working out like he would have hoped. Sure, the stock's 5.2% annual yield at the beginning of the year looked appetizing.
Here's the problem: Shares of the stock are down 10.5% this year. That leaves Berkshire Hathaway with a net loss of 5.3%. And that stings. Not only is the S&P 500's total return roughly 10% this year. Berkshire Hathaway is the largest owner of Kraft Heinz shares at 27.5%.
And the stock's chart isn't pretty, either. The RS Rating is just 22 and EPS Rating 47. Analysts think profit will fall 15% this year.
Other Dividend Busts
Chemical firm Dow has been the top dividend bust this year. Even with a nearly 7% annualized yield starting earlier in the year, shares are down more than 40% this year. That leaves investors with a net loss of 34%.
Don't look for comfort from the chart, either. Dow sports RS and EPS Ratings of just 6. Analysts think profit will drop 150% this year, marking the fourth-straight years of declines.
And a giant dividend can't shield you, either. Chemical firm LyondellBasell yielded a whopping 7.2% in January. The problem is the stock is down more than 25% in the past year, for a net loss of 18%. Again, the charts don't look great. The RS Rating is just 11 and EPS Rating 13. Analysts are calling for a 56% drop in profit this year.
So before grabbing for those big yields, keep in mind the risk.
Biggest Tumbles From Big Yields
All started year with 5% or higher yields
| Company | Ticker | Yield on Jan. 1 | YTD stock % ch. | Net loss |
|---|---|---|---|---|
| Dow | DOW | 7.0% | -41.0% | -34.0% |
| United Parcel Service | UPS | 5.2 | -31.7 | -26.5 |
| Conagra Brands | CAG | 5.0 | -30.4 | -25.4 |
| LyondellBasell Industries | LYB | 7.2 | -25.4 | -18.2 |
| Alexandria Real Estate Equities | ARE | 5.4 | -20.6 | -15.2 |
| Diamondback Energy | FANG | 5.1 | -15.8 | -10.7 |
| Healthpeak Properties | DOC | 5.9 | -14.7 | -8.7 |
| BXP | BXP | 5.3 | -10.7 | -5.5 |
| Kraft Heinz | KHC | 5.2 | -10.5 | -5.3 |
| Amcor | AMCR | 5.4 | -8.1 | -2.7 |
| Host Hotels & Resorts | HST | 6.0 | -7.7 | -1.7 |
