You don't have to be a dividend investor to love dividend stocks.
Even if you prefer to invest in growth stocks, every investor loves to get a quarterly check in the mail or in their brokerage account.
So what are the best-paying dividend stocks today? One way to narrow down the list is to take a respected index like the S&P 500 and see what the top-yielding stocks are. Without further ado, let's see if any of the three top-yielding dividend stocks are worth buying.
Image source: Getty Images.
1. Altria (dividend yield 8.8%)
Altria (MO 1.11%) is the top dividend payer on the S&P 500. That shouldn't come as a surprise to investors who follow the stock. Tobacco stocks are well known as rewarding dividend stocks, and Altria and its peers were among the top performers on the stock market in the 20th century.
These days, the domestic Marlboro maker has seen its growth rate slow, but it's still highly profitable, and its low valuation allows it to pay a dividend yield of 8.8%.
However, a high yield alone isn't a reason to buy a stock. Cigarettes are a declining industry, and Altria has struggled to move beyond them, despite numerous efforts to do so. The company spent $12 billion to take a 35% stake in JUUL and was left with practically nothing after several years of regulatory crackdowns. Its investment in cannabis grower Cronos Group also failed to create value, and it was also unable to find success with iQOS, Philip Morris International's heat-not-burn product.
NYSE: MO
Key Data Points
Altria has since turned to NJOY to drive its next-gen business, but that brand is still small, and its overall revenue and adjusted earnings per share (EPS) both fell by 2.5% in the first quarter.
Dividend investors might be enticed by Altria's yield, but even for yield seekers, there are better options on the market. For example, you might want to consider British American Tobacco, which offers a dividend yield of 9.7%.
2. Verizon (6.7% dividend yield)
Like tobacco, telecom stocks are also well known for being strong dividend payers, and Verizon (VZ 0.40%) is a perennial high-yield dividend stock.
Also like tobacco, telecom is a slow-growth industry that tends to throw off rivers of cash. However, telecom is still a form of technology, and operators like Verizon have to make heavy capital expenditures to keep up with new technologies and infrastructure needs.
The good news is that Verizon and its peers seem to have passed the peak of the 5G investment cycle, meaning capital expenditures are expected to decline this year, lifting free cash flow.
NYSE: VZ
Key Data Points
Verizon is still growing slowly with revenue up just 0.2% in the first quarter and wireless service revenue up 3.3% in the quarter, but competition in the industry seems to be normalizing, which should benefit Verizon.
For investors looking for a high yield from a reliably profitable company, Verizon is a smart buy.
3. Walgreens Boots Alliance (6.4% dividend yield)
Walgreens Boots Alliance (WBA +0.00%) has been at or near the top of many of these lists recently, but mostly for the wrong reasons. Shares of the drugstore chain have plunged due to a combination of a loss of business related to COVID-19, legal settlements related to opioids, and questionable acquisitions to diversify away from its core business.
The business is weak enough that it cut its dividend by 48% in January in order to conserve cash to fund its growth and strengthen its balance sheet.
NASDAQ: WBA
Key Data Points
Nonetheless, Walgreens still offers a 6.4% dividend yield, which is primarily a result of the stock falling 54% during the past year and more than 70% during the past five years.
Its second-quarter earnings report included a $5.8 billion goodwill impairment related to its acquisition, showing it's still reeling from bad acquisitions.
However, revenue and adjusted earnings are growing modestly, and the stock trades at a forward price-to-earnings (P/E) ratio of less than 5 based on its adjusted earnings per share forecast of $3.20 to $3.35.
Risk-tolerant investors may be willing to take a chance on Walgreens, but I'd prefer to see clearer that the business is stabilizing and the worst is behind it.
