10 Highest-Yielding Stocks Across S&P 500, Mid-Cap 400, and Small-Cap 600

An appealing way to generate returns through dividends with added risks.

(1) What's the buzz?

Dividend yields are vital to many investors' portfolios, especially those seeking consistent income. High-yield stocks offer an appealing way to generate returns through dividends but often come with added risks.

Here, we delve into the top 10 highest-yielding stocks across the S&P 500, Mid Cap 400, and Small Cap 600 indexes. These stocks represent diverse sectors and illustrate the different yield profiles across large, mid, and small-cap stocks.

S&P 500 – High-Yield Large-Cap Stocks

Overview: The S&P 500's highest-yielding stocks provide robust income but generally yield less than their mid and small-cap counterparts. Walgreens Boots Alliance (WBA) leads with a yield of 10.72%, indicating the pressure it faces amid changing retail trends and healthcare costs. Ford and Altria also stand out with yields above 7%, reflecting their cyclical and regulatory challenges.

Sectors Represented: High yields are concentrated in a few sectors, primarily Consumer Staples, Communication Services, and Energy. Companies like Altria and Walgreens highlight the challenges within the Consumer Staples sector, where high yields can signal both mature operations and potential risks tied to regulatory or market shifts. The presence of Ford and Verizon underscores how companies in highly competitive or capital-intensive sectors offer elevated yields to attract income-focused investors.

Lowest Yielding Stock in the Top 10: Dow Inc. rounds out this list with a forward yield of 5.84%, offering investors exposure to the Materials sector with a more modest income potential than other stocks on the list.

Mid-Cap 400 – Mid-Cap Stocks with High Yields

Overview: The Mid Cap 400 index offers higher yields than the S&P 500, with Annaly Capital Management (NLY) yielding an impressive 13.66% at the top. Annaly’s high yield reflects its position within the mortgage real estate investment trust (REIT) industry, a sector known for its focus on income distribution. Civitas Resources and Starwood Property Trust are close behind, offering yields of over 9%, which cater to income-oriented investors who can handle the higher risk associated with these stocks.

Sectors Represented: High-yield stocks in the mid-cap space are predominantly in Financials and Real Estate, specifically REITs. This sector concentration highlights the higher yields often found in financial assets and real estate, where companies may structure themselves as REITs or trusts to maximize shareholder returns. Real Estate and Energy stocks like Chord Energy (yielding 8.95%) make the mid-cap space attractive for those seeking higher income.

Lowest Yielding Stock in the Top 10: Whirlpool Corporation (WHR) rounds off the top ten with a respectable 6.67% yield, indicative of its mature market position in consumer durables. While lower than other mid-cap peers, this yield may provide more stability as a large player within the Consumer Discretionary sector.

Small Cap 600 – High-Yield Small-Cap Stocks

Overview: The Small Cap 600 offers some of the highest yields across all three indexes, with CVR Energy at the top, yielding 21.29%. This extraordinarily high yield signals potential risks but also a significant income opportunity for those willing to bear the volatility. Many stocks in this group, such as Two Harbors Investment Corp and ARMOUR Residential REIT, have yields well above 10%, making small-cap stocks a compelling, though riskier, option for income-seeking investors.

Sectors Represented: The Small Cap 600's top-yielding stocks are dominated by Financials and Energy. Mortgage REITs and financial trusts appear frequently, including New York Mortgage Trust and PennyMac, highlighting the attraction of small-cap financials to dividend-seeking investors. These financial assets often yield higher returns due to their leveraged business models and sector-specific risks.

Lowest Yielding Stock in the Top 10: Arbor Realty Trust (ABR) is at the lower end of this list, with a yield of 11.70%. Despite being the "lowest" here, this yield is still higher than most in the S&P 500, underscoring the high yield potential within small-cap investments.

(2) So what?

Key Insights

1. Higher Yields in Smaller Caps: Small-cap stocks in this list generally provide the highest yields compared to mid and large-caps. While enticing for income investors, these high yields also reflect elevated risks, as smaller companies tend to face greater market volatility and often operate in more cyclical industries.

2. Sector Concentration: Each index has dominant sectors. The S&P 500's high yielders lean toward Consumer Staples and Communication Services, while Mid Cap 400 features Real Estate and Financials. Small Cap 600 is heavily represented by Financials and Energy, particularly mortgage REITs and trusts. This sector composition indicates varying risk profiles tied to macroeconomic factors, with REITs and energy stocks facing risks from interest rates and commodity price fluctuations, respectively.

3. Risk Considerations: High yields can enhance income, but they often come with elevated risk, especially in smaller caps. Investors need to consider the sustainability of these yields, as excessively high yields might be unsustainable, signaling that the market views them as riskier investments.

(3) Now what?

For income-focused investors, high-yield stocks in each index present diverse opportunities. The S&P 500 offers relatively stable, if slightly lower, yields suitable for conservative investors. The Mid Cap 400 provides a blend of higher yields with moderate risk, which is especially attractive in the REIT space. Meanwhile, the Small Cap 600 offers some of the highest yields in the market but comes with additional risk.

In selecting high-yield stocks, investors should balance their desire for income with understanding the underlying risks. Diversifying across sectors and market caps can also mitigate some of these risks while still providing exposure to high-yielding assets.

Analyzing the financial positions and dividend histories of the top 10 highest-yielding stocks in the S&P 500, Mid Cap 400, and Small Cap 600 indexes provides insight into their stability and income potential.

(4) And next?

Among the top 10 highest-yielding stocks in the S&P 500, Mid Cap 400, and Small Cap 600 indexes, the following companies have consistently maintained or increased their dividends over the past 20 years without any reductions or omissions:

S&P 500:

• Altria Group, Inc. (MO): Altria has a remarkable record of increasing its dividend for 55 consecutive years, reflecting its commitment to returning value to shareholders.

• Franklin Resources, Inc. (BEN): Franklin Resources has consistently paid and increased dividends over the past two decades, demonstrating financial stability and a shareholder-friendly approach.

• Pfizer Inc. (PFE): Pfizer has maintained a steady dividend payment history, with regular increases, showcasing its robust financial health and dedication to shareholders.

Mid Cap 400:

• The Western Union Company (WU): Western Union has a consistent dividend payment history, with regular increases, indicating a stable financial position and commitment to returning capital to shareholders.

• Whirlpool Corporation (WHR): Whirlpool has a long-standing history of paying dividends, with consistent increases, reflecting its strong financial performance and shareholder focus.

Small Cap 600:

• Xerox Holdings Corporation (XRX): Xerox has maintained a stable dividend payment history over the past two decades, with consistent payments indicating a commitment to returning value to shareholders.

These companies have demonstrated resilience and a solid commitment to their dividend policies, making them noteworthy for income-focused investors seeking stability and consistent returns.