Going against the grain often works in investing. Several of the most successful investors are contrarians by nature. One popular investing strategy -- the "Dogs of the Dow" -- focuses on buying the 10 stocks in the Dow Jones Industrial Average (^DJI 0.26%) with the highest dividend yields. The "Dogs" in the strategy's name reflects the fact that the stocks with the highest yields tend to be laggards.
This general approach doesn't have to be limited to the Dow, though. And it doesn't have to include 10 stocks, either. Should you buy the three highest-paying dividend stocks in the S&P 500 (^GSPC 0.61%)?
1. Dow
Giant chemical company Dow (DOW 2.56%) (no relation to the Dow Jones, although it's in the index) ranks at the top of the S&P 500's highest-paying dividend stocks. Dow's forward dividend yield is a sky-high 9.61%. The company has paid a dividend in every quarter since 1912.
Why is Dow's dividend yield so high? Its dismal stock performance is the primary reason. Dow's share price has plunged nearly 50% over the last 12 months and is down roughly 27% so far in 2025. This steep decline is due to several factors, including an extended oversupply cycle in the global chemicals industry, weakness in the housing market, and worries about the impact of the Trump administration's tariffs.
NYSE: DOW
Key Data Points
Dow continues to feel the sting of the industry and economic headwinds. Its sales slid 2% year over year in the fourth quarter of 2024. The company also posted a net loss of $35 million. In response, Dow announced $1 billion in cost cuts, including a workforce reduction of 1,500 jobs.
Is this beaten-down stock a smart pick to buy right now? I doubt that Dow will be a winner for investors anytime soon. The company will likely struggle for a while. However, the stock could deliver attractive total returns over the long term -- especially with the help of its high dividend yield.
2. LyondellBasell Industries NV
LyondellBasell Industries NV (LYB 2.79%) isn't too far behind Dow with its forward dividend yield of 9.22%. This chemical company also has a solid track record of 14 consecutive years of dividend increases.
However, we can pretty much apply everything said about Dow to LyondellBasell. Its stock has fallen more than 40% over the last 12 months and more than 20% year to date because of the same industry and macroeconomic challenges plaguing Dow.
NYSE: LYB
Key Data Points
CEO Peter Vanacker referred to those "difficult market conditions" in his Q4 earnings comments, saying that it "has been the longest and deepest downturn" of his career. Like Dow, LyondellBasell reported a year-over-year revenue decline in Q4 and a net loss.
There are some reasons to be cautiously optimistic about LyondellBasell's near-term prospects. Interest rates have fallen in several major countries, while inflation has moderated. However, the U.S. tariffs are the wild card that could throw a wrench into any attempted recovery.
I think LyondellBasell, like Dow, could deliver solid returns over the long run. Don't bet on the stock doing so over the short term, though.
3. Pfizer
Pfizer (PFE 1.02%) takes the No. 3 spot among the highest-paying S&P 500 dividend stocks. The big drugmaker's forward dividend yield is a lofty 7.65%. It also boasts an impressive 16-year streak of annual dividend hikes.
But it's the same song, different verse as to why Pfizer's dividend yield is so high. The pharma stock is more than 60% below its peak set in late 2021. Pfizer's share price has fallen roughly 15% year to date. The blame for these declines can be placed on sinking COVID-19 product revenue, a looming patent cliff, and some pipeline setbacks.
NYSE: PFE
Key Data Points
However, Pfizer has had some good news. The company's revenue jumped 21% year over year in Q4. Adjusted earnings per share increased more than 6x. Pfizer's cost savings initiatives are paying off. Its pipeline has had a few positive developments as well, including U.S. approval of an Adcetris combo therapy in treating relapsed or refractory large B-cell lymphoma.
I think Pfizer is a good pick for income investors. The company's negatives are already baked into the share price, but its growth potential from new products isn't. Pfizer's super-low price-to-earnings-to-growth (PEG) ratio of 0.52 (which uses five-year growth projections from analysts surveyed by LSEG) supports this view. Wall Street believes this ultra-high-yield dividend stock has plenty of room to run. So do I.
