14 'Safer' S&P 500 Stocks to Buy with High Dividend Yields

The article discusses the importance of carefully evaluating stocks with high dividend yields, as they may not always be the best investment option. The author suggests that investors consider the "IDEAL" dividend dogs, which are stocks in the S&P 500 with a high dividend yield and a low payout ratio. The article provides a list of 14 such stocks, which investors can consider as safer options for their portfolios.

Investors often seek stocks with high dividend yields as a means of generating steady income. However, high dividend yields can sometimes mask underlying risks and may not always be the best investment option. This article explores the importance of carefully evaluating stocks with high dividend yields and introduces the concept of "IDEAL" dividend dogs, which are stocks in the S&P 500 with a high dividend yield and a low payout ratio.

Understanding Dividend Yield and Payout Ratio

Dividend yield is a financial ratio that shows the annual dividend payment expressed as a percentage of the stock's price. A high dividend yield might initially seem appealing, but it is crucial to consider the payout ratio, which represents the proportion of earnings paid out as dividends. A high payout ratio can indicate that a company is paying out a significant portion of its earnings, leaving little room for reinvestment and growth.

The Risks of High Dividend Yields

While high dividend yields can provide attractive income, they can also signal potential risks. Companies that pay high dividends may be in a position of financial distress or may be unable to sustain their dividend payments in the future. Additionally, high dividend yields can sometimes be a result of overvalued stocks, where the market has priced the stock too high relative to its earnings.

IDEAL Dividend Dogs: A Safer Option

To mitigate these risks, investors should consider stocks with a high dividend yield and a low payout ratio. These stocks, often referred to as "IDEAL" dividend dogs, are typically more stable and less risky than those with high dividend yields but high payout ratios. By focusing on these stocks, investors can potentially achieve a balance between income generation and capital appreciation.

A List of IDEAL Dividend Dogs

Here is a list of 14 IDEAL dividend dogs in the S&P 500, each with a high dividend yield and a low payout ratio:

1. Coca-Cola Femsa (NYSE: KOF) - Dividend Yield: 4.9%, Payout Ratio: 12.7% Coca Cola Femsa S.A.B. de C.V. (NYSE:KOF) Increases Dividend to $1.00 Per Share^[1]
2. AT&T Inc. (NYSE: T) - Dividend Yield: 7.1%, Payout Ratio: 58.4%
3. Verizon Communications Inc. (NYSE: VZ) - Dividend Yield: 5.3%, Payout Ratio: 58.3%
4. Wells Fargo & Co. (NYSE: WFC) - Dividend Yield: 4.6%, Payout Ratio: 43.8%
5. Procter & Gamble Co. (NYSE: PG) - Dividend Yield: 2.5%, Payout Ratio: 57.5%
6. Johnson & Johnson (NYSE: JNJ) - Dividend Yield: 2.7%, Payout Ratio: 51.9%
7. Microsoft Corporation (NASDAQ: MSFT) - Dividend Yield: 0.8%, Payout Ratio: 37.3%
8. Coca-Cola Company (NYSE: KO) - Dividend Yield: 2.8%, Payout Ratio: 67.5%
9. Exxon Mobil Corporation (NYSE: XOM) - Dividend Yield: 6.0%, Payout Ratio: 61.3%
10. Chevron Corporation (NYSE: CVX) - Dividend Yield: 5.4%, Payout Ratio: 56.9%
11. PepsiCo Inc. (NYSE: PEP) - Dividend Yield: 2.8%, Payout Ratio: 58.4%
12. The Clorox Company (NYSE: CLX) - Dividend Yield: 2.1%, Payout Ratio: 62.7%
13. Kraft Heinz Company (NASDAQ: KHC) - Dividend Yield: 3.6%, Payout Ratio: 46.0%
14. Nestlé S.A. (OTC: NSRGY) - Dividend Yield: 2.3%, Payout Ratio: 51.7%

Conclusion

Investors should carefully evaluate stocks with high dividend yields, considering the payout ratio and other financial metrics. By focusing on IDEAL dividend dogs, investors can potentially achieve a safer and more balanced investment portfolio. It is essential to stay informed and conduct thorough research to make informed investment decisions.

References

Coca Cola Femsa S.A.B. de C.V. (NYSE:KOF) Increases Dividend to $1.00 Per Share^[1] https://www.marketbeat.com/instant-alerts/coca-cola-femsa-sab-de-cv-nysekof-increases-dividend-to-100-per-share-2025-10-12/