Do you want income from your portfolio?
You should certainly consider it. After all, the current bull market is nearly three years old and stocks have become historically expensive. The Shiller price-to-earnings ratio, which is based on average inflation-adjusted earnings of the past 10 years, is at its second-highest level in more than 140 years.
When the next bear market arrives -- that's a when, not an if, because it will eventually happen -- you will want to be holding dividend-paying stocks that deliver income while the market is moving down or sideways.
But which dividend-paying stocks should a smart investor be looking at?
Well above average yields
Consider that the current yield of the entire S&P 500 index -- the sum of all the annual dividends those stocks pay divided by the cumulative share price -- is just about 1.15%. It's that low because many of the stocks in the index pay small dividends relative to their share prices, and about a quarter of the companies in the index pay no dividend at all.
Fortunately, there are many stocks in the S&P 500 with dividend yields that are way above the index average.
These three have yields that are among the highest in the S&P 500 index.
- LyondellBasell Industries (LYB 3.96%), 11.8%.
- Alexandria Real Estate Equities (ARE 3.05%), 9%.
- Conagra Brands (CAG 1.04%), 8.1%.
Let's take a quick look at these three dividend monsters and see if they're worth buying.
Tough markets and regulations
LyondellBasell Industries is an international chemical company that specializes in refining and producing plastic resins. The company has a market cap of about $14.5 billion and annual sales of about $30 billion.
NYSE: LYB
Key Data Points
But revenue is currently going the wrong way. Third-quarter revenue of $7.7 billion was down 25% from a year earlier, with a net loss of $890 million. The company blamed a difficult market and regulatory environment that caused significant write-downs.
The stock is down 38% year to date (since Jan. 1, 2025) and 47% during the past 52 weeks. Wall Street's average recommendation on the LyondellBasell is a hold.
Falling occupancy
Alexandria Real Estate Equities is a real estate investment trust (REIT) that specializes in office buildings and labs with tenants in the life sciences and technology sectors. It caters to businesses in high-tech cluster areas like Boston, San Francisco, New York, and Southern California.
Times are tough for this company, too. The REIT reported Q3 results last week that saw it miss analysts' expectations on both revenue and earnings. Revenue dropped 5% and funds from operations, a metric REITs use to measure recurring operating earnings, fell 7%.
NYSE: ARE
Key Data Points
Worse, management lowered its forecast for funds from operations for 2025.
The company reported a falling occupancy rate and also realized real estate impairments in the quarter -- trying to get all the bad news out at once -- that pushed earnings into the red.
The stock is down 43% year to date and 50% during the past year. Yet Wall Street currently rates it a buy.
Declining sales and profits
Conagra Brands makes well-known packaged foods such as Slim Jim, Healthy Choice, Duncan Hines, Hunt's, Vlasic, and Birds Eye, among many others.
This company, too, has performed poorly of late. In its fiscal first quarter (ended Aug. 24), sales declined 5.8% while earnings fell almost 65%. Low growth, inflationary pressures, and high debt are the culprits for the company's recent misfortunes. It has also lost sales and profit from recent divestitures of entire units, such as Chef Boyardee canned pasta.
NYSE: CAG
Key Data Points
The stock is down 38% this year and 40% during the past 52 weeks. The average recommendation is a hold.
A big part of the reason these three stocks have such high dividend yields is, of course, that their share prices are down significantly during the past year. Stock prices and dividend yields move in opposite directions, after all.
So are they worth buying?
Image source: Getty Images.
I would argue that LyondellBasell Industries should be avoided, as predicting where the international plastics market and tariffs are headed is difficult right now. As for Alexandria Real Estate, it caters to businesses in an industry -- biotech -- that is poised for strong growth during the next decade, and it has a strong credit ranking and stable balance sheet.
For its part, Conagra is in the midst of a turnaround that could lower debt and boost profits -- and send the share price back up.
All three stocks are clearly on sale at the moment, so investors can pick them up now and enjoy a steady return while they wait for share prices to recover.
