Money doesn't grow on trees, but there are ways to collect passive income from doing nothing. Some companies pass along a portion of profits to shareholders through dividends, which can be an excellent way to book a return without selling stock.
While the S&P 500 dividend yield is just 1.3%, some stocks have far higher yields either because they have steadily raised their payouts or their stock prices are down big, pushing up the yield.
United Parcel Service (UPS +0.02%), APA Corporation (APA 0.87%), and Robert Half (RHI 4.78%) are three dividend stocks whose yields have ballooned above 5% due to falling stock prices. Here's why all three companies are worth a closer look in May.
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From bad to worse for UPS, but it should get better
Daniel Foelber (United Parcel Service): UPS is hovering around a five-year low. A big dividend raise in early 2022, paired with small raises since then and a falling stock price, has pushed the package delivery giant's yield to 6.8%. This yield is at an all-time high, but for all the wrong reasons.
When UPS raised its dividend by 49% in early 2022, it seemed reasonable given the surge in earnings per share (EPS) and free cash flow (FCF). But as you can see in the following chart, EPS and FCF have been declining for years, making the once reasonable dividend payment borderline unaffordable.
UPS data by YCharts. EPS = earnings per share. TTM = trailing 12 months.
On recent earnings calls, management has reassured investors that the dividend is safe. However, UPS wants earnings to be double the dividend. There are only two ways to achieve that goal: grow earnings faster than the dividend or cut the payout.
First-quarter 2025 results didn't give investors a lot to smile about. Consolidated operating profit and diluted EPS were barely higher than Q1 2024, which is disappointing, considering the weak comps. UPS decided not to provide a full-year guidance update but did provide second-quarter guidance. In the upcoming quarter, UPS expects U.S. domestic average delivery volume to be down 9% and revenue to be down by low single digits from Q2 2024. Again, this is particularly bad given the weak comps from last year.
Despite all the challenges, UPS could still be worth buying for patient investors. Unlike some turnaround companies that are desperately losing market share and are unprofitable, UPS is still incredibly profitable. Its poor results stem from the overexpansion of its network to prepare for a sustained boom in delivery volumes. Instead, delivery volumes flatlined post-pandemic, leaving UPS overextended. In other words, these issues are solvable.
UPS still has plenty of long-term advantages and operating leverage. Profits are still slightly above pre-pandemic levels; they just look low because of how much they grew in 2020 and 2021.
NYSE: UPS
Key Data Points
UPS wouldn't be in dire straits if its dividend weren't such a high expense. But given where the dividend is, UPS is left with little wiggle room to navigate challenges. As my colleague Lee Samaha points out, UPS may be better off cutting its dividend so it can focus on its long-term growth plans, like high-margin deliveries, technology investments, and so forth.
Given the stock's slumping price, investors clearly aren't sticking around to hold the stock just for its high yield. A 50% cut would do wonders for the company's balance sheet and relieve some pressure so management can focus on turning the business around. And UPS would still yield a hefty 3.4% even if the dividend were cut in half, which is still more than many well-known dividend stocks with high yields, such as Coca-Cola.
All told, UPS stands out as a good choice for investors looking for a beaten-down value stock to buy in May.
There's more than one reason to power your portfolio with APA
Scott Levine (APA Corporation): While some niches of the market have shown resilience during this market downturn, the oil patch isn't one of them. With energy prices plummeting, investors have largely dismissed oil and gas stocks. But smart investors know that this shortsightedness can provide great buying opportunities.
Such is the case with APA Corporation -- an upstream energy company with assets in the United States, Egypt, and the United Kingdom -- whose stock currently offers an enticing 6.2% forward yield. Consistent with the strong correlation between movements in the price of oil and gas stocks, investors should find the fall in APA's stock unsurprising as it mirrors the decline in the price of oil benchmarks West Texas Intermediate and Brent.
Because energy stocks are cyclical, those with longer investing horizons can take advantage of downturns such as these. APA, in particular, is a worthy consideration, considering its judicious approach to the dividend. In 2024, for example, the company returned 71% of free cash flow to shareholders, while management projects allocating at least 60% of free cash for shareholders -- in the form of dividends and stock buybacks -- in 2025.
NASDAQ: APA
Key Data Points
Adding to the stock's allure right now is that it's trading at a discount to its historic valuation. While APA stock's five-year average operating cash flow multiple is 2.7, shares are currently trading at only 1.4 times operating cash flow.
A cyclical stock with a 5.3% dividend yield
Lee Samaha (Robert Half): Buying into a human resource and recruitment company when the economy is weakening might seem like a recipe for disaster, but hear me out. There are two good reasons for buying the stock to earn passive income. The first is that Robert Half is a company with excellent cash-generating properties, and its dividend has long been very well covered, even in recessionary periods.
RHI Free Cash Flow Per Share data by YCharts. TTM = trailing 12 months.
The second reason is that the economy's slowdown is caused by "heightened economic uncertainty over U.S. trade and other policy developments," according to CEO Keith Waddell on the recent earnings call. As such, "client and job seeker caution continues to elongate decision cycles and subdue hiring activity and new project starts."
But here's the thing: That uncertainty will reduce when there's greater clarity over the tariffs or trade deals, leading to a de-escalation in the conflict. Consequently, Robert Half will be ideally positioned to be one of the early beneficiaries of a release of delayed hiring plans.
NYSE: RHI
Key Data Points
All told, the stock's downside is protected by its dividend and cash flow, while there's upside potential from a de-escalation of trade disagreements. Meanwhile, investors will earn a 5.3% dividend yield.
