S&P 500 Dividend Yield Hits 20-Year Low Amid Strong Returns

A recent report highlights that the S&P 500 has surged by 35% over the past year, yet its dividend yield has plummeted to 1.2%, the lowest in over two decades. Companies like Realty Income, Kinder Morgan, and Verizon stand out for offering significantly higher yields.

Date: 16-11-2024

AI Rating: 7

The report provides a comprehensive view of the S&P 500's performance, noting a substantial gain of 35% over the past year. However, this impressive growth comes at a cost, as the S&P 500's dividend yield has decreased from 1.7% a year ago to approximately 1.2%, marking the lowest yield in over 20 years. This decline in yield indicates that while the stock prices have appreciated, the income generated from dividends has significantly reduced, affecting income-focused investors.

Income-focused investors may be disappointed by the low yields from the broader S&P 500 index. In contrast, the report highlights specific companies offering significantly higher dividend yields, such as Realty Income, Kinder Morgan, and Verizon. These companies appear to be solid investment options for those seeking better dividend income.

Realty Income: Realty Income has a current yield of more than 5.5% and boasts a remarkable history of 653 consecutive monthly dividend payments and 127 increases in payouts since 1994. The company's stable rental income and plans to invest $3.5 billion into new properties this year should support its ability to continue increasing dividends. The expectation of nearly 5% growth in cash flow per share indicates a positive outlook for dividend sustainability.

Kinder Morgan: Kinder Morgan offers a yield of nearly 4.5% and has raised its dividend for seven consecutive years. With a stable cash flow structure where 68% of earnings are take-or-pay or hedged, the company retains financial flexibility while funding expansion projects worth over $5 billion planned until 2028. This stability gives it a favorable backdrop for continued dividend growth.

Verizon: Verizon's yield exceeds 6.5%, and its strong cash flow of $26.5 billion in the first nine months of the year supports its dividend payouts and capital expenditures. With ongoing investments in expanding 5G and fiber networks, alongside the acquisition of Frontier Communications, Verizon is poised for future cash flow increases, enabling it to maintain and potentially increase dividends.

Overall, the report emphasizes the importance of selecting individual stocks with reliable dividend histories, especially as the S&P 500's yield falls. Realty Income, Kinder Morgan, and Verizon stand out as prime candidates for investors seeking better income opportunities.

Stocks: O KMI VZ