The Top 10 S&P 500 Dividend Stocks for February

The S&P 500 is up only 1.7% for the year to date, so the yields on the top-paying dividend stocks haven’t changed all that much from a month ago. The yields on these dividend stocks are still remarkably high, ranging anywhere from 5% to more than 16%.

High Yield Dividend StocksHigh yields on dividend stocks are often a red flag, and that certainly goes for many — if not most — of the dividend stocks in the S&P 500 with the highest yields. A blue-chip telecom with a long record of high yields is a dividend stock you can bank on. Those payouts aren’t going away.

But many of the names on this list have high yields only because their share prices have fallen so far. Just like bonds, a dividend stock’s yield and price move in opposite directions. In some cases, these stocks have be laid low for company-specific reasons. In other cases, some of these dividend stocks have been slammed by macroeconomic forces out of their control.

Either way, many of these dividend stocks sport yields that are higher than the average junk bond. You should always do your own due diligence before buying any security. That goes double for many of the top-yielding dividend stocks in the S&P 500 below. (Dividend yields as of market close Feb. 11.)

Top S&P 500 Dividend Stocks #10: Oneok Inc. (OKE)

oneok-inc-oke-185OKE Dividend Yield: 5.3%

Oneok Inc. (NYSE:OKE) makes the list of top S&P 500 dividend stocks for a second straight month. Little wonder there — its in the energy business where prices have tumbled. OKE is the general partner of natural gas transport and storage firm Oneok Partners LP (NYSE:OKS), and gas prices are falling in sympathy with oil prices.

Oil prices have sent OKE stock down about 4% for the year-to-date. Combine that with the company’s dividend-friendly partnership structure, and you’ve got a name throwing off a yield above 5%.

Fortunately for anyone holding OKE stock, analysts believe that gas utilities will be able in far better shape during the industry downturn than any company that engaged in the exploration and production of oil and natural gas.

Top S&P 500 Dividend Stocks #9: HCP, Inc. (HCP)

hcp-stock-dividend-stocksHCP Dividend Yield: 5.31%

Real estate investment trusts (REITs) like HCP, Inc. (NYSE:HCP) are required to pay out most of their earnings as dividends in exchange for certain tax benefits, which is why so many of them make lists of high-yielding dividend stocks. With a consistently high dividend yield, HCP has become a staple on our monthly list of dividend stocks.

Indeed, as a U.S. healthcare REIT, HCP stock is insulated from geopolitical troubles or European credit worries, helping it to zig when the market zags. A 29-year track record of rising dividends doesn’t hurt, either. HCP has been paying dividends since 1985, which is why it makes InvestorPlace’s list of Dependable Dividend Stocks.

At the same time, HCP’s fundamentals have been propelling shares, too. HCP stock is up 13% in the past year.

Top S&P 500 Dividend Stocks #8: CenturyLink Inc (CTL)

centurylink185CTL Dividend Yield: 5.33%

CenturyLink Inc (NYSE:CTL) is a telecommunications company that’s a longtime leader among S&P 500 dividend stocks, but the yield has come down rather dramatically as CTL stock has been taking off. Indeed, CTL is up 28% over the last 52 weeks, more than doubling the performance of the broader market.

Over longer periods of time, CTL has been such a big-time market laggard, this year’s price appreciation must be downright disorienting for long-time holders. Those returns, however, are real. Heck, between the price change and fat dividend, CTL generated a total return of 32% in calendar 2014.

And lest you think CTL can’t keep it up, although there are never guarantees for price appreciation, gushers of free cash flow make the dividend something investors can bank on.

Top S&P 500 Dividend Stocks #7: AT&T Inc. (T)

AT&T stockT Dividend Yield: 5.47%

Historically, it’s hard to beat telecommunications companies for steady, generous and dependable dividend stocks. Heck, just look at AT&T Inc. (NYSE:T). This member of the Dow Jones Industrial Average has been throwing off a dividend since 1984, and it’s pretty much always the biggest dividend yield of any company in the blue-chip average.

Of course, sometimes you need to throw off a big dividend yield to keep shareholders sticking around when the price is letting them down. Even though you probably don’t own T for red-hot price upside, it’s not encouraging to see AT&T underperform the market by 7% over the last 52 weeks.

But hey, at least T is committed to buying growth. In addition to a $50-billion deal to acquire DIRECTV (NASDAQ:DTV), the telco more recently struck a $2.5 billion deal for the third-largest wireless company in Mexico.

Top S&P 500 Dividend Stocks #6: Mattel, Inc. (MAT)

Mattel MATMAT Dividend Yield: 5.64%

Blame in on Barbie. Toymaker Mattel, Inc. (NYSE:MAT) finds itself among the top 10 dividend stocks because falling prices boost dividend yields. MAT has been in a downtrend since last summer, and it only accelerated after weak holiday selling season.

As a result, MAT stock is already off 11% for the year-to-date, underperforming the broader market by about 12 percentage points, as very little went Mattel’s way in 2014, and the troubles just won’t go away.

Rival Hasbro, Inc. (NASDAQ:HAS) beat out Mattel for a lucrative deal to make dolls based on the hit Walt Disney Co (NYSE:DIS) movie Frozen last year, while Denmark’s Lego overtook Mattel as the world’s largest toymaker. Worst of all, Mattel is suffering a sales slump in Barbie toys, which is by far the most important toy for the company.

Top S&P 500 Dividend Stocks #5: Freeport-McMoRan Inc. (FCX)

Freeport-McMoRan Copper & Gold FCX logoFCX Dividend Yield: 6.72%

Slumping prices for copper and hold have been hurting mining giant Freeport-McMoRan Inc (NYSE:FCX) for four years now, but the selloff really accelerated in the second half of 2014. Cut to today, and FCX is off almost 14% for the year-to-date.

And FCX could see more downside soon. Global economic weakness isn’t helping prices in the $140 billion copper market — neither are the miners and smelters. Indeed, industry players are keen on increasing copper production despite softness in prices.

FCX is hardly a dumpster fire, however. Analysts say it generates good free cash flow from operations, trades at a reasonable valuation and has expanding profit margins.

Top S&P 500 Dividend Stocks #4: Noble Corp. (NE)

energy stocks noble neNE Dividend Yield: 8.33%

And now we get to the saddest part of the top S&P 500 dividend stocks, where three of the top four highest yielders belong to that most beleaguered of industries: oil drillers.

Benchmark crude oil prices are hitting lows not seen in more than five years, and that means there’s little incentive to add to supply. Low prices have rigs owed and operated by Noble Corp plc (NYSE:NE) and charging painfully low day rates (or sitting uselessly idle).

As a result, NE stock is now down more than 40% over the last 12 months and the yield has climbed within striking distance of 10%. That’s a terrific deal for income if NE can keep up the payments, but with oil prices forecast to keep falling, it’s still too soon to buy this name.

Top S&P 500 Dividend Stocks #3: Ensco plc (ESV)

Ensco185ESV Dividend Yield: 10.59%

ENSCO PLC (NYSE:ESV) is another oil and gas driller getting laid low by declining rates for rigs amid a soft energy market. Indeed, ESV has lost more than 40% over the last 52 weeks, lagging the broader market by more than 50 percentage points.

Deepwater drilling stocks were thought to have bottomed out over the summer, but they’ve only been getting cheaper ever since. Heck, benchmark crude oil futures are still sitting at $50 per barrel.

ESV stock does sport a massive dividend yield for new money, but investors need to realize there’s a risk. ESV — like NE and others — will be forced to cut that dividend it if the energy market weakens further. ESV might be worth it for its gusher of income, but oil prices will have to bounce back for shares to rise, to say nothing of keeping the dividend safe.

Top S&P 500 Dividend Stocks #2: Windstream Holdings, Inc. (WIN)

windstream-win-stock-dividend-stocksWIN Dividend Yield: 11.33%

Windstream Holdings, Inc. (NYSE:WIN) — like CTL — is one of these regional telecom stocks with an ugly long-term chart that turned things around last year. It also sports a massive dividend. Indeed, WIN was a monthly lock for the No. 1 S&P 500 dividend payer until the deepwater drillers sunk on low oil prices.

In late July, WIN shares were hitting intraday highs of $13-and-change, but it has since cooled off substantially. Now it goes for $8, but the share price is still up 13% in the past year.

In addition to losing essentially all of its mojo, WIN pays out more in dividends than it earns in profit. Although WIN has more than enough levered free cash flow to keep the dividend stream coming, that alone makes plenty of investors uneasy about sticking with the name.

Top S&P 500 Dividend Stocks #1: Transocean Ltd. (RIG)

Transocean185RIG Dividend Yield: 16.32%

And now for the sad tale of that dividend stock yielding the 16% we mentioned above. Around this time about four months ago, Transocean LTD (NYSE:RIG) — a deepwater driller — had a dividend yield of about 10%. The stock has fallen off a cliff since then, sending the yield up to today’s spit-take levels.

Indeed, RIG has lost almost 30% over the last three months, putting it down nearly 60% for the trailing 52 weeks. And there’s little RIG can do about it.

Oil prices continue to decline with no let up in sight. Heck, OPEC is determined to maintain production targets because it wants to keep its market share (and put shale-oil producers out of business.) OPEC’s actions have Wall Street analysts cutting their targets and ratings on the entire energy sector. Moreover, the industry is rife with anxiety that this year′s drilling projects are on the chopping block.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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