S&P 500: 14 Stocks Paying Huge Dividends Totally Burn Investors

Dividend stocks are the new darlings in S&P 500. But investors are getting burned on those stocks, too.




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So far this year, 14 stocks now yielding 4% or more, including financial T. Rowe Price (TROW), real estate firm Simon Property Group (SPG) and VF (VFC), pounded investors with 20% net losses even after adding in a full year of current dividends. That means the fat annual dividend investors looked forward to for the full year, and then some, is wiped out for now by the stocks’ decline.

It’s just another reminder that simply chasing big yields isn’t a good way to make money in the S&P 500, even in a tough market.

“Given our view that we are shifting from a price return to a total return world, dividend yield and bird-in-the-hand strategies are likely to outperform long duration growth stocks,” said Bank of America strategist Savita Subramanian. “But in stressed markets, shifting down to Quintile 2 of the Russell 1000 is a prudent way to avoid yield traps — high dividend yielding stocks whose prices are falling ahead of likely dividend cut.”

Lose Money On S&P 500 Dividend Payers?

It’s not just an unlucky handful of S&P 500 stocks that dropped so much this year. It’s a pretty typical occurrence.

More than 50 stocks in the S&P 500 pay a dividend of 4% or more. That’s seemingly pretty lucrative if you figure the SPDR S&P 500 Trust (SPY) only yields 1.5%. But here’s the problem. Roughly 70% of those high yielding stocks have fallen this year by much more than 4%. And that erases this big dividend’s net benefit.

It may come as a bit of surprise to S&P 500 dividend investors they’re actually losing money. And it’s more of the rule than the exception, now. The SPDR S&P Dividend ETF (SDY) is now down 9% this year. That more than wipes out its dividend yield of 2.9% for a net loss of 6.1%.

Dividends Go Out The Window

Some examples in the S&P 500 show how disappointing some dividend stocks have been.

Take asset manager T. Rowe Price. Coming into the year, the stock yielded 2.2%. But that dividend and then some is totally wiped out by the stock’s 42% drop this year so far. Even the fact the stock now yields 4.3% is a small prize given the size of the market losses.

Simon Property, an owner of malls, is a more dramatic example. Had you bought the stock in January, you’d look forward to a 4.1% dividend yield. And now, the yield is up to 7.1%. The problem is that the stock is also down 39% this year. That means even with the current annual yield of 7.1%, you’re down 32% on a net basis.

And then there’s clothing maker VF. Some investors may have been tempted by the stock’s 2.7% yield coming into the year. But the bear market wiped that out fast. Shares lost more than a third of their value this year, erasing even the 4.4% current dividend yield for a net loss of 32%.

It’s true that these losses aren’t realized until you sell. And you still collect the dividend if you still own the stock. But this year is a reminder that dividends aren’t the slam dunk you might think.

Big Dividends, Net Losses

S&P 500 stocks yielding 4% or more down 20% or more this year including current dividend

Company Symbol Year to date stock % ch. Dividend yield Net yield (year-to-date loss plus current dividend) Sector
T. Rowe Price (TROW) -41.5% 4.3% -37.2% financials
Simon Property (SPG) -39.5 7.1 -32.4 Real Estate
VF Corp. (VFC) -36.2 4.4 -31.8 Consumer Discretionary
Whirlpool (WHR) -30.3 4.6 -25.7 Consumer Discretionary
Healthpeak Properties (PEAK) -29.9 4.8 -25.1 Real Estate
Best Buy (BBY) -29.8 5.0 -24.8 Consumer Discretionary
Vornado Realty (VNO) -31.8 7.5 -24.2 Real Estate
Federal Realty Investment (FRT) -28.7 4.5 -24.2 Real Estate
Interpublic Group (IPG) -28.1 4.3 -23.8 Communication Services
Invesco (IVZ) -27.5 4.5 23.0 financials
Franklin Resources (BEN) -27.2 4.8 -22.4 financials
3M (MMM) -26.7 4.6 -22.2 industrials
KeyCorp (KEY) -26.5 4.5 -22.0 financials
Citizens Financial (CFG) -25.6 4.3 -21.3 financials
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz

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