How Big Dividends Are Hiding Bigger Trouble for These S&P 500 Stocks

Dividends over 6%? Sounds like a dream. But in this market, it is usually a red flag. When a stock yields that kind of yield, it is less of a reward and more of a warning: something is probably broken.

These aren’t the Magnificent 7. These are their evil cousins. The Suspicious 8. Companies offering fat dividends because their stock prices have tanked or because Wall Street thinks a cut is coming. The market doesn’t pay you that much without a reason.

But the temptation is real. The group’s median yield is 6.3%, which means your money doubles in 11 years, if prices don’t fall and dividends don’t get slashed. Big ifs. Still, every once in a while, you get a bounce-back. AT&T did it. The stock is up 84% in two years, and the yield dropped to 4% as a result. That is a win. But for most of these names, it is not a sure thing.

LyondellBasell (Yield: 11.3%)

This is the top yielder on the list, and that is not good news. The chemical giant is drowning in a polyethylene glut. That is plastic, the kind used in everything from food packaging to toys. The problem is, there is too much of it and not enough demand.

Jakob / Unsplash / Analysts say cash flow isn’t even close to covering the dividend. J.P. Morgan warns the worst might still be coming.

And if you are looking for signals, competitor Dow already chopped its dividend in half. Lyondell could be next.

UPS (Yield: 7.8%)

UPS is cutting routes, staff, and even parts of its network. It is shedding billions in low-margin Amazon business and trying to get leaner. All this while global shipping is dragging thanks to tariffs and weak demand.

Management insists the dividend is “rock solid,” but investors are nervous. If the economy picks up, UPS could bounce back. But right now, it is playing defense.

Conagra Brands (Yield: 7.3%)

This food maker is feeling the heat. Sales are slipping. Consumers are opting for cheaper alternatives to name brands. On top of that, fancy new diet drugs are curbing appetites across the country.

The result? Shrinking profits and a business stuck between inflation and changing habits. Conagra hasn’t cut its dividend, but that payout looks less comfortable with every earnings report.

Kraft Heinz (Yield: 6.1%)

Do you recall when Kraft slashed its dividend in 2019? That pain still echoes. Today, it is in a similar spot. Consumers are moving away from processed foods, and profits are slipping again.

The company plans to split into two units next year, one for Kraft and Heinz, another for Oscar Mayer and Lunchables. That sounds interesting, but the pressure isn’t going away. The dividend may be safe for now, but it is not bulletproof.

Healthpeak Properties (Yield: 6.3%)

Healthpeak is a REIT, or a real estate investment trust, and its tenants are primarily pharmaceutical companies. That is a niche, and lately, not a great one. The stock price reflects concerns about rising interest rates and weak demand in certain healthcare sectors.

Jean / Unsplash / While REITs are supposed to be reliable dividend payers, Healthpeak’s payout looks exposed if rents slow or tenants leave.

It is stable today, but there is stress under the surface.

Alexandria Real Estate Equities (Yield: 6.3%)

Another REIT, another red flag. Alexandria rents lab space to biotech and pharma companies. That was hot in 2020. Now? Not so much. Biotech funding is down, and demand for lab space is cooling.

The company has quality properties, but high yields like this aren’t typical unless investors smell risk. The payout is still flowing, but the business model is showing cracks.

Pfizer (Yield: 6.3%)

Pfizer had a wild ride recently. Shares jumped after it struck a deal with Trump’s team to offer drug discounts through a new government site, TrumpRx.gov. That calmed fears about harsh drug pricing reforms.

Still, this is a company that made billions during COVID and is now scrambling to replace lost revenue. The dividend looks okay today, but long term, Pfizer needs new blockbuster drugs or more deals like this one to stay attractive.