S&P 500 investors still like dividend stocks. But, they're being much pickier about them this year.
Nine stocks in the S&P 500 yielding 4% or higher, including Paramount Global, LyondellBasell and Dow, are up more than 6% this year so far, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
That makes this group of high-yield S&P 500 stocks very unusual. They're not just outperforming the market, but paying a dividend at least 160% more as well. In contrast, the S&P 500 is up 5.9% this year and yields just 1.5%.
Finding dividend stocks that are working is tougher this year. Many investors are shifting to riskier stocks. But the effort is worthwhile. "We ... caution against chasing the rebound in equity prices, particularly in growth-style equities and sectors like technology," said Gargi Chaudhuri, Head of iShares Investment Strategy, Americas. "We prefer value over growth and see continued upside for energy, high dividend stocks, and infrastructure names."
Dividends Take Work, But It's Worth It
Don't think you can just buy any dividend stock and expect things to work out. The iShares Core High Dividend fund is down 1% this year, trailing the S&P 500's nearly 6% rise. Even the ETF's 3.2% dividend yield isn't enough to lure more investors.
This year, S&P 500 investors aren't just buying stocks due to their high yields. Stocks yielding 4% or higher are up just 1.7% on average this year and lagging the S&P 500. At the same time, stocks yielding less than 4% are up nearly 7% on average.
But digging deeper, S&P 500 investors are plunging into a handful of high dividend paying stocks.
S&P 500 Materials Dividend Stocks A Source Of Profits
Three of the highest dividend paying stocks blowing away the S&P 500 are in the materials industry. That's more than any of the other 11 sectors in the S&P 500.
Take LyondellBasell as an example. The company makes industrial chemicals. But it's also making good returns for investors. Shares of the chemical company are up nearly 18% this year on top of paying a 4.8% yield.
Chemical stalwart Dow is another example. Shares of the company are up 15.2% this year. And investors owning the stock can look forward to an additional dividend yield of 4.8%.
Paramount Global Is The Pinnacle of Top-Performing Yield
Investors are scrambling to buy S&P 500 materials companies. But their most desired high-yield play is entertainment giant Paramount Global.
Shares of the company, benefiting from popularity of its streaming services, are up an astounding 40% this year. That's a welcome gain following last year's 44.1% drubbing. But the company is now yielding 4.1% despite this year's run-up.
So if you're not sure where the S&P 500 is going, at least some stocks offer solid yields while you wait.
Dividend Winners This Year
Stocks yielding 4% or more topping the S&P 500 this year
| Company | Ticker | Sector | Year-to-date ch. | Yield |
|---|---|---|---|---|
| Paramount Global | Communication Services | 39.0% | 4.08% | |
| LyondellBasell Industries | Materials | 17.6 | 4.82 | |
| Dow | Materials | 15.2 | 4.77 | |
| Newell Brands | Consumer Discretionary | 14.7 | 6.01 | |
| International Paper | Materials | 10.0 | 4.78 | |
| Ford Motor | Consumer Discretionary | 9.7 | 4.64 | |
| Digital Realty Trust | Real Estate | 9.0 | 4.32 | |
| NRG Energy | Utilities | 6.7 | 4.43 | |
| Public Storage | Real Estate | 6.3 | 4.00 |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
