By Philip van Doorn
The stock market, shocked by the Federal Reserve’s policy changes to fight inflation, has been gored this year, with growth and technology companies bearing the brunt of the biggest declines. Dividend stocks, in contrast, have actually risen.
Below is a screen of the components of the S&P 500 High Yield Index expected to raise their quarterly dividend payouts the most over the next two years. The current dividend yields aren’t necessarily very high. But a rapid increase in payouts may bode well for overall performance as the increases imply healthy cash-flow trends.
First, check out this comparison of total returns (with dividends reinvested) for the the SPDR Portfolio S&P 500 High Dividend ETF /zigman2/quotes/204586803/composite SPYD -2.30% and the SPDR S&P 500 ETF /zigman2/quotes/209901640/composite SPY -2.04% :
That performance for the high-dividend group — a total return of 3.5% this year through May 24 — has been nothing short of breathtaking when you consider that the S&P 500 has dropped 17.1%.
Components of the High Yield Index
Starting with the full S&P 500 /zigman2/quotes/210599714/realtime SPX -2.06% , S&P Dow Jones Indices narrows the list to 80 stocks with the highest indicated dividend yields for the next 12 months. The High Yield Index is rebalanced semi-annually.
Click here for S&P Dow Jones Indices’ description of the S&P 500 High Yield Index, then click on the fact sheet and methodology for more information.
Screening for dividend stocks
The components of the S&P 500 High Yield Index have dividend yields ranging from 1.98% (Baker Hughes Co. /zigman2/quotes/205323712/composite BKR -2.73% ) to 8.42% (Lumen Technologies Inc. /zigman2/quotes/200067545/composite LUMN -4.54% . (Lumen had been known as CenturyLink until it was renamed in September 2020. The company cut its dividend payout by more than 50% in February 2019, showing that investors need to dig in with further research, especially if a stock has a very high current yield).
In comparison, the S&P 500 has a weighted dividend yield of 1.63%, according to FactSet.
Highest expected dividend increases
Here are the 15 companies in the S&P 500 High Yield Index expected to increase their annual dividend payouts the most through 2024, based on consensus estimates among analysts polled by FactSet:
|Company||Ticker||Current dividend yield||Current annual dividend rate||Estimated dividend – 2023||Estimated dividend – 2024||Two-year estimated dividend increase|
|EOG Resources Inc.||/zigman2/quotes/204634330/composite EOG||2.32%||$3.00||$3.09||$5.72||47.6%|
|PPL Corp.||/zigman2/quotes/207772352/composite PPL||2.68%||$0.80||$1.03||$1.10||27.0%|
|M&T Bank Corp.||/zigman2/quotes/207957637/composite MTB||2.84%||$4.80||$5.34||$6.27||23.5%|
|Regions Financial Corp.||/zigman2/quotes/202396577/composite RF||3.33%||$0.68||$0.79||$0.87||22.3%|
|Omnicom Group Inc.||/zigman2/quotes/209996569/composite OMC||4.03%||$2.80||$3.18||$3.51||20.3%|
|Baker Hughes Company Class A||/zigman2/quotes/205323712/composite BKR||1.98%||$0.72||$0.78||$0.89||18.9%|
|Amgen Inc.||/zigman2/quotes/209157011/composite AMGN||3.08%||$7.76||$8.32||$9.52||18.5%|
|Principal Financial Group Inc.||/zigman2/quotes/201030797/composite PFG||3.64%||$2.56||$2.82||$3.10||17.5%|
|Citizens Financial Group Inc.||/zigman2/quotes/205410375/composite CFG||4.03%||$1.56||$1.72||$1.88||17.0%|
|Welltower Inc.||/zigman2/quotes/200485564/composite WELL||2.76%||$2.44||$2.64||$2.92||16.4%|
|Viatris Inc.||/zigman2/quotes/209413137/composite VTRS||4.16%||$0.48||$0.50||$0.57||15.8%|
|Ventas Inc.||/zigman2/quotes/206376229/composite VTR||3.20%||$1.80||$1.98||$2.13||15.5%|
|Huntington Bancshares Inc.||/zigman2/quotes/209314988/composite HBAN||4.62%||$0.62||$0.67||$0.73||15.4%|
|Altria Group Inc.||/zigman2/quotes/208895754/composite MO||6.80%||$3.60||$3.98||$4.25||15.3%|
|Citigroup Inc.||/zigman2/quotes/207741460/composite C||3.87%||$2.04||$2.20||$2.40||15.1%|
Click on the tickers for more about each company.
Read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
A look back over the past five years shows that three of the companies, above, have cut their dividends:
PPL Corp. /zigman2/quotes/207772352/composite PPL -2.70% cut its payout by 52% in February.