The dividend yield of the S&P 500 has been on a downward trend in recent years, primarily due to the dominance of growth stocks in the index and stock prices outpacing dividend growth rates. Currently, the index yields just 1.3%, which may not be sufficient for investors looking to boost their passive income stream. As a result, investors may want to consider higher-yielding options to meet their income goals.
Three companies that offer attractive dividend yields are Chevron (CVX), United Parcel Service (UPS), and Dow (DOW). At the time of writing, Chevron yields 4.5%, UPS yields 5.3%, and Dow yields an impressive 7%. All three companies have experienced sell-offs in recent months and are trading near their 52-week lows, presenting a potential buying opportunity for investors seeking to enhance their dividend income.
Chevron, a leading energy company, is poised to improve its free cash flow with its acquisition of Hess. The acquisition, which has received regulatory approval, is expected to boost Chevron’s revenue and free cash flow, enabling the company to continue increasing its dividend payout. Despite facing some challenges related to the acquisition process, Chevron’s stock is currently trading at a discount compared to its historical cash flow multiple, making it an attractive option for income-focused investors.
United Parcel Service, a global logistics company, has faced challenges in recent years, including a slowdown in package deliveries and increased costs associated with a labor dispute. However, key metrics for UPS are showing signs of improvement, and the company is expected to see an earnings recovery in 2025. With a focus on targeted, higher-margin deliveries and investments in productivity-enhancing technology, UPS is well-positioned to maintain its dividend and drive growth in the coming years.
Dow, a chemical specialist, has seen its stock price decline significantly in recent months, making it one of the highest-yielding stocks in the S&P 500 with a dividend yield of 7%. While the company’s earnings have been volatile in recent years, Dow has a strong balance sheet and investment-grade credit rating, providing stability for its dividend payout. Investors may want to monitor how Dow responds to potential challenges such as higher interest rates before considering an investment, but the stock’s high yield makes it an attractive option for long-term income investors.
In conclusion, the current low dividend yield of the S&P 500 has prompted investors to seek higher-yielding options to enhance their passive income streams. Companies like Chevron, United Parcel Service, and Dow offer attractive dividend yields and potential for growth, making them worth considering for investors looking to boost their dividend income in the coming years. By carefully evaluating these opportunities and staying informed about market trends, investors can build a diversified portfolio that meets their income goals.
