Investing

The 5 Highest Yielding S&P 500 Dividend Stocks Are Passive Income Kings

Lee Jackson

Published: November 21, 2024 8:46 am

24/7 Wall St. Insights:

• The venerable S&P 500 is poised for another year of 20% + gains
• Many of the stocks in the index have underperformed the red-hot Magnificent 7
• Passive income is simple- own quality dividends that pay you for doing nothing. Don’t miss out on our brand-new “7 Things I Demand in a Dividend Stock” report. It includes 2 A++ dividend stocks and how to spot future dividend winners that can put your returns on hyperdrive. https://a673b.bigscoots-temp.com/dividend-legends/

Most dividend investors seek solid passive income streams from quality dividend stocks. Passive income is a steady stream of unearned income that doesn’t require active traditional work. Shared ideas for earning passive income include investments like dividend stocks, bonds, mutual funds, real estate, and additional income-producing side hustles.

According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade, business, or investment in which the individual does not materially participate. 

While the Magnificent Seven, especially Nvidia Inc (NASDAQ: NVDA), have driven the S&P 500 and the Nasdaq to recent all-time highs, most are wildly overbought. By comparison, most of the venerable S&P 500 index still trades at reasonable levels.

The S&P 500 is up 23% in 2024, so we decided to screen the dividend stocks, looking for companies that could provide investors with solid passive income streams and pay the biggest dividends in the legacy index. We found five companies that growth and income investors should grab now. These stocks are not just bargains; they are steals, and with rates lowered this year and possibly until 2026, they should be snapped up in a heartbeat. All are rated Buy at top Wall Street firms.

Why do we cover dividend stocks?

Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.

Walgreens Boots Alliance

This huge drugstore chain is paying a gigantic 10.7% dividend, which could get cut as the company is going through a massive reorganization and closing 1200 stores. Even if the dividend is cut in half, it will remain over 5%. Walgreens Boots Alliance (NYSE: WBA) is a pharmacy-led health and beauty retail company with three segments:

• Retail Pharmacy USA
• Retail Pharmacy International
• Pharmaceutical Wholesale

The Retail Pharmacy USA segment sells prescription drugs and various retail products, including health, wellness, beauty, personal care, consumables, and general merchandise, through its retail drugstores.

It also provides specialty pharmacy services and mail services. This segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States and six specialty pharmacies.

Walgreens Boots Alliance’s Retail Pharmacy International segment is a testament to its diverse product offerings. It sells prescription drugs, health and wellness products, beauty products, personal care products, and other consumer products through its pharmacy-led health and beauty stores and optical practices.

The International segment has operations in:

• The United Kingdom
• Thailand
• Norway
• The Republic of Ireland
• The Netherlands
• Mexico
• Chile

For now, the company also operates 550 optical practices, including 165 on a franchise basis.

The Pharmaceutical Wholesale segment wholesales and distributes specialty and generic pharmaceuticals, health and beauty products, and home healthcare supplies and equipment and provides related services to pharmacies and other healthcare providers.

Altria

This tobacco company offers value investors a great entry point now and a rich 8.17% dividend. Altria Group Inc. (NYSE: MO) manufactures and sells smokable and oral tobacco products in the United States through its subsidiaries.

The company provides cigarettes primarily under the Marlboro brand;

• Cigars and pipe tobacco, principally under the Black & Mild brand
• Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands
• on! Oral nicotine pouches.

It sells its tobacco products primarily to wholesalers, including distributors and large retail organizations, such as chain stores.

Altria used to own over 10% of Anheuser-Busch InBev (NYSE: BUD), the world’s largest brewer. The company sold 35 million of its 197 million shares through a global secondary offering earlier this year. That represents 18% of their holdings but still leaves a hefty 8% of the outstanding shares in their back pocket. They also announced a $2.4 billion stock repurchase plan partially funded by the sale.

Verizon

This top telecommunications company offers tremendous value, trading at 8.75 times estimated 2025 earnings and paying investors a strong 6.56% dividend. Verizon Communications, Inc. (NYSE: VZ), through its subsidiaries, provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide.

It operates in two segments:

• Verizon Consumer Group
• Verizon Business Group

The Consumer segment provides wireless services across the wireless networks in the United States under the Verizon and TracFone brands and through wholesale and other arrangements.

It also provides fixed wireless access (FWA) broadband through its wireless networks and related equipment and devices, such as:

• Smartphones
• Tablets
• Smartwatches and other wireless-enabled connected devices

The segment also offers wireline services in Mid-Atlantic, Northeastern United States, and Washington D.C. through its fiber-optic network, Verizon Fios product portfolio, and a copper-based network.

The Business segment provides wireless and wireline communications services and products, including:

• FWA broadband
• Data
• Video and conferencing
• Corporate networking
• Security and managed network
• Local and long-distance voice

Network access services to deliver various IoT services and products to businesses, government customers, and wireless and wireline carriers in the United States and internationally.

LyondellBasell

This blue-chip chemical giant offers a very dependable 6.15% dividend. LyondellBasell Industries N.V. (NYSE: LYB) operates as a chemical company in:

• The United States
• Germany
• Mexico
• Italy
• Poland
• France
• Japan
• China
• the Netherlands
• Internationally

The company operates in six segments:

• Olefins and Polyolefins-Americas
• Olefins and Polyolefins-Europe, Asia, International
• Intermediates and Derivatives
• Advanced Polymer Solutions
• Refining
• Technology

It produces and markets olefins and co-products, polyethylene and polypropylene, propylene oxide and derivatives, oxyfuels and related products, and intermediate chemicals, such as styrene monomer, acetyls, ethylene oxide, and ethylene glycol.

In addition, the company produces and markets compounding and solutions, including:

• Polypropylene compounds
• Engineered plastics, masterbatches
• Engineered composites, colors, and powders
• Advanced polymers, including catalloy and polybutene-1
• Refines heavy, high-sulfur crude oil, other crude oils, and refined products, including gasoline and distillates

Further, it develops and licenses chemical and polyolefin process technologies; manufactures and sells polyolefin catalysts; and serves food packaging, home furnishings, automotive components, and paints and coatings applications.

Franklin Resources

This company is a mutual fund powerhouse that pays a safe and secure 5.95% dividend. Franklin Resources Inc (NYSE: BEN) is among the most prominent global money managers. The firm markets mutual funds and institutional separate accounts under the Franklin, Templeton, and Mutual Series brands. At times, 50% of its sales are from outside the US, an advantage given the maturing US market.

Franklin Resources offers its products and services under the brands of:

• Franklin
• Templeton
• Franklin Mutual Series
• Franklin Bissett
• Fiduciary Trust
• Darby
• Balanced Equity Management
• K2
• LibertyShares
• Edinburgh Partners

The 2023-2024 bull market has proven to be a solid tailwind for the company. While withdrawals from baby boomers may be a concern, the path forward looks solid.