Should you buy the 3 highest dividend stocks in the S&P 500?

that much S&P 500 Last month its value fell 4.2%. According to S&P Global, “Geopolitics, rising Treasury yields, inflation and monetary policy concerns are to blame for the recent decline, but stocks may still have room to rise again.”

After the decline, the three iconic dividend stocks now pay hefty yields between 6.5% and 9%. If you’re looking for big dividends, this is your opportunity.

This 9% dividend has always been reliable.

Altria Group (Missouri 0.43%) It has been a high dividend stock for a long time. Over the past five years, the dividend yield has always been above 6%. Due to the recent weakness in the stock price, the current dividend yield is around 9%. This is a great opportunity to acquire a recession-resistant business with high free cash flow.

Altria is essentially a tobacco business. We have a portfolio of renowned brands including Marlboro, Copenhagen, Skoal, Red Seal, Benson & Hedges, Chesterfield, NJOY, and Black & Mild. This is a market that changes slightly from year to year, even during economic downturns. Product mix may change. For example, combustibles have slowly lost share to vaporized nicotine, but overall nicotine use has remained stable. Altria’s reputation, market access, and capital advantages have allowed it to compete wherever its core markets are headed.

Just because the nicotine market is stable doesn’t mean it’s growing. For example, from 2018 to 2023, nicotine use increased by just 1%. This is why Altria pays such large dividends. These stocks won’t make you rich overnight, but they have proven to be a reliable way to generate consistent dividend income over the long term. That equation is unlikely to change much over the next few years.

MO data from YCharts.

These 2 Stocks Became Dividend All-Stars

The telecommunications industry has a long history of paying above-average dividends. These businesses may initially be expensive to set up, but once established and operating, they typically generate high levels of free cash flow. AT&T (tea -0.06%) and verizon (VZ 1.53%)For example, they now pay dividends of 6.5% and 6.7% respectively. But before you jump in, there are a few things you need to know.

VZ data from YCharts.

As you can see in the chart above, both AT&T and Verizon have consistently paid high dividends, but Verizon’s yields in particular have risen significantly in recent years. But the driving force behind these high returns was not dramatically higher dividends. What has changed is that the stock prices of the two companies have gradually fallen, artificially inflating the dividend yield.

We can see how these dynamics play out by looking at each company’s total return over the past 10 years. These returns affect both stock price movements and dividends. Since 2014, Verizon and AT&T have both posted total returns of approximately 35%. For comparison, the S&P 500 is up 234%.

AT&T and Verizon both face their own challenges. But the fundamental problem is that competition has weakened pricing power and increased operating costs. AT&T actually had to cut its dividend in 2022 after its media division WarnerMedia was spun off. Verizon has been able to gradually increase its payments, but not by much. Last quarter, the company increased its payout by 2%.

Should you buy Altria, Verizon, or AT&T stock?

If you’re looking for a reliable, high-yielding dividend stock, Altria Group is a better choice than AT&T or Verizon. The latter two aren’t terrible businesses, but the increasing competition in telecommunications isn’t slowing down any time soon. Although Altria faces its own competition, its solid lead in the combustible materials market gives it time to innovate and take control as new market categories emerge.