If you’re looking for income, turning to your investment portfolio is a natural choice. Lately, that’s been a tough assignment, because many sources of investment income have almost completely dried up. Looking for top yields from bank CDs and bonds is an exercise in futility right now.
Instead, the natural place to look for income right now is from dividend-paying stocks . It’s important to be careful, though, because high-yield dividend payers can often bring some unexpected risks. With that in mind, here are the three top-yielding dividend stocks in the S&P 500, along with a closer look at whether their respective business models can keep them moving higher.
1. Lumen Technologies
At the top of the list is Lumen Technologies (NYSE:LUMN). The name might not be familiar to you because it has changed several times in recent years, but Lumen incorporates the businesses that used to be known as CenturyLink and Level 3 Communications.
For dividend investors, Lumen looks attractive at current levels. The company pays $0.25 per share every quarter, and on a stock price of around $12, that works out to roughly an 8.3% dividend yield. That’s more than quadruple the overall yield for the S&P 500, which is currently below the 2% mark.
Lumen’s telecom business model provides regular cash flow that has been able to support ongoing dividend payments even when earnings have been lacking. However, when you look back at Lumen’s recent dividend history, you’ll see a few marks against the company. The biggest came in early 2019, when the company slashed its dividend by more than half from $0.54 per share. Much of the stock’s decline since then has stemmed from a loss of confidence from dividend investors.
The big question for would-be investors is whether Lumen has finally gotten control of its debt and is in position to keep strengthening its balance sheet. Often, the telecom business requires massive capital investments in order to keep up with technological advances. Yet some believe that with low interest rates, Lumen could actually raise its dividend within the next few years. If that happens, it will almost certainly push the share price up as well.
2. ONEOK
The oil and natural gas market has been a tough place for investors lately, but it has also created some big opportunities for dividend investors. ONEOK (NYSE:OKE) had a dividend yield in the double digits for much of 2020, but as the oil market has started to recover, a rising stock price has knocked the yield lower. Nevertheless, with a yield of 8.2%, ONEOK still numbers among top S&P dividend payers.
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