Today we will look at the five companies in the S&P 500 (US500) stock index with the highest dividend yield over the past 12 months, namely Pioneer Natural Resources Company, Coterra Energy Inc., Devon Energy Corporation, Lincoln National Corporation, and Altria Group.

What is the S&P 500?

The S&P 500 is an exchange-traded index that includes the stocks of the 500 largest US public companies by market capitalisation. These stocks are traded on the NYSE and NASDAQ. Investors refer to this index when analysing returns on their portfolios.

What is dividend yield?

Dividend yield (DY) is the dividend payout per share for the last 12 months divided by the current stock value. This ratio is expressed in percentage terms.

Calculation formula:

DY = (D / P) x 100%

In the formula:

  • D is the sum of dividend payouts per share during the last 12 months
  • P is the current share price

Selection criteria

  • The shares are included in the S&P 500 index
  • The period is 12 months starting 10 April 2022 to 10 April 2023 inclusive
  • The current stock price is the closing price after the trading session of 10 April 2023
  • The dividend yield is more than 8%

The list of companies below is based on the data compiled by finviz.com.

1. Pioneer Natural Resources – 12.51%

Founded in: 1997

Registered in: Irving, Texas

Sector: energy

Platform: NYSE

Market capitalisation: $52.31 billion

Pioneer Natural Resources Company (NYSE: PXD) specialises in oil and gas exploration and mining in the US. It is the third-largest oil producer in the Permian basin, the largest oil field in the US. Rising energy prices have positively impacted the company’s income, allowing it to increase its dividend from $1.2 per share in 2019 to $25.44 in 2022.

2. Coterra Energy – 9.75%

Founded in: 1989

Registered in: Houston, Texas

Sector: energy

Platform: NYSE

Market capitalisation: $20.08 billion

Coterra Energy Inc. (NYSE: CTRA) designs solar energy projects and has quickly become one of the main representatives of this sector in the US. S&P Global Commodity Insights ranked Coterra among the 250 fastest-growing energy companies in the world. From 2019 to 2022 inclusive, its dividend payout increased from $0.35 to $2.49 per share.

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3. Devon Energy – 9.48%

Founded in: 1971

Registered in: Oklahoma City, Oklahoma

Sector: energy

Platform: NYSE

Market capitalisation: $35.33 billion

Devon Energy Corporation (NYSE: DVN) is engaged in the exploration, mining, transportation, and marketing of oil and natural gas in the US. From 2019 to 2022 inclusive, the dividend payout increased from $0.35 to $5.15 per share.

4. Lincoln National – 8.59%

Founded in: 1905

Registered in: Radnor, Pennsylvania

Sector: financial

Platform: NYSE

Market capitalisation: $3.64 billion

Lincoln National Corporation (NYSE: LNC) operates multiple insurance and retirement businesses in the US. It works in the segments of life insurance, group insurance, and retirement plan services. In the period from 2019 through 2022, the increase in dividend payments was hardly impressive – from $1.48 to $1.80 per share.

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5. Altria Group – 8.45%

Founded in: 1822

Registered in: Richmond, Virginia

Sector: consumer defensive

Platform: NYSE

Market capitalisation: $79.46 billion

Altria Group (NYSE: MO) which used to be called Philip Morris Companies Inc. until 2003, is one of the world’s largest manufacturers and sellers of tobacco and tobacco products. Moreover, the company invests in the development of the medical cannabis sector. From 2019 through 2022, Altria’s dividend payout rose from $3.28 to $3.68 per share.

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Risks of investing in stocks with high dividend yields

  • Reduced dividend payments or elimination of dividends. A high dividend yield can be a sign that a company is having difficulty paying dividends. If a company’s profit is declining, the company may reduce or eliminate the dividend payments altogether to maintain financial stability.
  • Market risks. Economic downturns and other external factors can affect a company’s business negatively, deteriorating its financial situation and the value of its stock.
  • Industry risks. This refers to the negative impact of individual factors that certain sectors are prone to. For example, for the energy sector, this might be the fluctuations of commodity prices or changes in legislation.
  • Taxation peculiarities. Dividend income is usually taxed, which can significantly reduce an investor’s net profit.
  • No diversification. If an investor concentrates solely on one company or several stocks of one sector because of their high dividend yield, this can seriously increase the risk of losses and decrease the total return.

Summary

The dividend yield is one of the factors that can help assess the attractiveness of a company’s shares for investment; however, it is by no means the main factor. It should always be kept in mind that investing in such stocks has advantages as well as risks.

The Top 5 list of S&P 500 shares with the highest dividend yield over the past 12 months features Pioneer Natural Resources Company, Coterra Energy Inc., Devon Energy Corporation, Lincoln National Corporation, and Altria Group. Note that the first three companies on the list represent the energy sector.

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* – Past performance is not a reliable indicator of future results or future performance.

The material presented and the information contained herein is for information purposes only and in no way should be considered as the provision of investment advice for the purposes of Investment Firms Law 87(I)/2017 of the Republic of Cyprus or any other form of personal advice or recommendation, which relates to certain types of transactions with certain types of financial instruments.