Highest Dividend Payers Are Biggest Losers in S&P 500

Exciting price appreciation and big dividend yields seldom go together. Growth stocks, typically from the technology sector, often pay small or no dividends. Companies with generous payouts tend to be large-cap, mature players in such areas as consumer staples. Lately, many of the best dividend payers have seen their prices suffer.

As of last week, the 101 stocks in the S&P 500 that have no dividends were up an average 20.7% for the year, while the prices for the 100 with the highest yields were down 3.2%, according to research firm Bespoke Investment Group. What’s more, those with a yield of 5% or more were off 8.4%.

As the Bespoke report noted, the leading players’ “5%-plus dividend yields are being more than erased by falling share prices.”

The S&P 500 has had a good record in 2023, although it has ebbed some since late July. As of Wednesday, it had a total return of 15.9%, consisting of a 14.7% price increase and a 1.2% dividend yield.

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The stock with the largest yield, that of Marlboro maker Altria, at 8.5%, is barely in the black this year, with its total return (price plus dividends) ahead a mere 1%. Altria, like other cigarette purveyors, has been on a long-term downtrend as cigarette sales shrink. The company has maintained its earnings through price hikes.

Verizon (8.0% yield) and AT&T (7.8%) are in worse shape, with their total returns in negative territory: minus 13.1% and 19.3%, respectively.

Part of these losses stem from revelations about the lead in the telecoms companies’ cable sheathings, installed decades ago—which saddles them with making costly replacements for those wires. The larger challenge is that they are in a more competitive U.S. wireless market, with the likes of T-Mobile grabbing market share for cell phones. Both Verizon and AT&T logged disappointing earnings in their latest quarters.

Smaller banks also have had a tough time of late, with KeyCorp (6.9% yield) last month reporting a bigger-than-expected 50% fall in quarterly earnings. The yearly return is down 29.2%. Like other regional lenders, KeyCorp has had to increase reserves for loan losses, as high borrowing costs threaten small banks. Adding to reserves has sapped earnings. After the collapse of Silicon Valley Bank and two other small lenders, regional banks in general have seen share prices drop.

With a 6.5% yield and a tiny 2023 return of 1.4%, pipeline and terminal operator Kinder Morgan also recently posted lower-than-expected second-quarter revenue due to lower oil and natural gas prices. Another factor: China’s underwhelming post-lockdown recovery has dented fuel demand.

How times have changed. The Bespoke study pointed out that, in August 2020, the S&P 500’s dividend yield of 1.79% was less than half a percentage point (0.46) higher than the highest yield on the Treasury curve: the 30-year, at 1.33%. As of last week, in contrast, the index’s 12-month yield of 1.55% was 2.6 percentage points lower than the lowest point on the Treasury curve, the 10-year, at 4.15%.

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Tags: Altria, Bespoke Investment Group, dividend stocks, dividend yields, dividends, KeyCorp, Kinder Morgan, S&P 500, SAT&T, Silicon Valley Bank, Verizon

BNY Mellon Wealth Management has promoted Sinead Colton-Grant to CIO, effective January 1, 2024. She will succeed Leo Grohowski, who is planning to retire at the end of the year. Colton-Grant is currently BNY Mellon’s head of investor solutions, a position she has held for more than two years.

Grohowski, who has been CIO of BNY Mellon Wealth Management for 16 years, will retire after a career of more than four decades. He currently leads all investment strategy and investment management functions for the wealth management organization and is chairman of the firm’s Investment Policy Committee. BNY Mellon’s statement praised Grohowski for the way he has “played a pivotal role in shaping investment strategy and execution, and successfully guided clients through multiple business cycles.”

Colton-Grant joined BNY Mellon Wealth Management in 2020 as deputy CIO and head of equities and had responsibility for the large-cap equity investment group, the equity trading team and the capital markets group. She led the equity strategy committee and is vice chair of the Investment Policy Committee. She was also previously head of global investment and product strategy for Mellon, BNY Mellon Investment Management’s North American investment firm.

Colton-Grant, who is based in New York and reports to Catherine Keating, global head of BNY Mellon Wealth Management, joined BNY Mellon in 2012 through Mellon Capital, where she held various senior investment roles. Prior to joining BNY Mellon, Colton-Grant was managing director of multi-asset client solutions at BlackRock, and before that, she was head of currency at Invesco.

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According to her LinkedIn profile, she was also head of portfolio management at capital market company Lee Overlay Partners and currency portfolio manager at J.P. Morgan Asset Management. She started her career as a foreign exchange and options salesperson at Chase Manhattan Bank.

“We appreciate Leo’s many contributions to our business and celebrate the deep talent bench he has built,” Keating said in a release. “As a proven investment leader, Sinead is well-positioned to assume this role and we look forward to building on the investment team’s success.”

According to the company, as part of the transition, CIO for Investor Solutions Chris Vella will lead the investor solutions business.