Looking for income? These dividend stocks have high yields that seem well supported.

By Philip van Doorn

Companies in the S&P 500 making the cut include Ford, Pfizer and Verizon

These are among the 11 stocks that passed a screen of the S&P 500 for high dividend yields that are expected to be well covered by the companies' free cash flow.

Stocks with relatively high dividend yields have been performing very well as a group, in line with the general broadening of performance for the U.S. stock market. And if you are an investor who wishes to pursue even higher dividend yields, the screen below might serve as a good starting point for your own research.

Dividend stocks have been outperforming the broader market, as recent volatility in the artificial-intelligence trade has driven some investors into companies deemed as safer, or less volatile, with higher payouts.

So far in October, the iShares Core High Dividend ETF HDV has returned 8.4% and the Schwab U.S. Dividend Equity ETF SCHD has returned 7.9%, while the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 SPX, has returned 1.3%.

Here's how all three have performed this year through Wednesday, with dividends reinvested:

The Schwab US Dividend Equity ETF has more than doubled the total return of the S&P 500 during 2026 through Oct. 28.

Here is a look at the three ETFs with their current 30-day SEC yields, forward price-to-earnings ratios and total returns for three longer periods:

 
Exchange-traded fund               30-day SEC yield  Forward P/E  3-year return  5-year return  10-year return 
iShares Core High Dividend ETF                3.51%         16.0            79%            84%            175% 
Schwab US Dividend Equity ETF                 3.14%         14.7            76%            62%            255% 
State Street SPDR S&P 500 ETF                 0.95%         18.7            95%            80%            326% 
                                                                                               Source: FactSet 

The 30-day yields are calculations mandated by the Securities and Exchange Commission for investors to use when comparing funds' dividend yields. The yield for the iShares Core High Dividend ETF is quoted as of Sept. 30, while the other two are as of Oct. 27.

The iShares Core High Dividend ETF distributes dividends monthly, while the other two funds distribute quarterly.

The forward price-to-earnings ratios are based on consensus 12-month earnings-per-share estimates among analysts polled by FactSet, weighted in the same way as the funds' portfolios. The two dividend-stock ETFs trade at lower P/E ratios than the State Street SPDR S&P 500 ETF does, and their yields are more than three times as high as SPY's yield. So these dividend ETFs can be considered to be value-oriented investments.

The tendency has been for the dividend ETFs to underperform the S&P 500 for longer periods, because high-dividend payers tend to prioritize returning cash flow to shareholders while other may prefer to spend it on growing the business.

Screening dividend stocks for higher yields

The 3.51% 30-day yield for the iShares Core High Dividend ETF is impressive, when compared with that of SPY. Then again, 3-month U.S. Treasury bills BX:TMUBMUSD03M were yielding 4.11% early on Thursday, while 10-year U.S. Treasury notes BX:TMUBMUSD10Y were yielding 5.02%.

Of course, investors interested in dividend stocks are looking for long-term growth to go along with current income. And this is where one has to keep in mind that a high dividend yield can be a value trap. A stock's dividend yield might be high because investors have lost confidence in the company and the share price has fallen. The high yield might be a leading indicator that a dividend cut is coming.

One way to highlight how well a company is positioned to cover its dividend payout, and potentially increase it, is to look at its free-cash-flow yield.

A company's free cash flow (FCF) is its remaining cash flow after capital expenditures. This is money that can be used to pay dividends, repurchase shares (which can lower the share count and lift earnings per share), fund expansion or for other corporate purposes.

We can compare a company's estimated FCF yield to its current dividend yield, to see if there is FCF "headroom."

Starting with the S&P 500, we looked at projected FCF yields for the next 12 months based on estimates among analysts polled by FactSet, which were available for most of the companies. Then we isolated stocks with dividend yields of at least 5.00% that also have estimated FCF headroom of at least 2.00%. That left us with 11 stocks. Here they are, sorted by dividend yield:

 
Company                             Dividend yield  Estimated FCF yield for next 12 months  Forward headroom  2026 total return 
VICI Properties                              7.82%                                  10.84%             3.02%               -12% 
Alexandria Real Estate Equities              7.22%                                  10.18%             2.96%               -15% 
Kraft Heinz                                  6.71%                                   9.71%             3.01%                 3% 
Verizon Communications                       6.55%                                  13.14%             6.59%                13% 
Comcast                                      6.12%                                  17.08%            10.96%               -19% 
Pfizer                                       5.84%                                   8.46%             2.62%                24% 
Realty Income                                5.79%                                   8.16%             2.36%                 4% 
Amcor                                        5.69%                                   9.14%             3.45%                14% 
Hormel Foods                                 5.68%                                   7.80%             2.12%                -8% 
AT&T                                         5.36%                                  14.06%             8.70%               -13% 
Ford Motor                                   5.02%                                   7.96%             2.94%                -6% 
                                                                                                                Source: FactSet 

The list includes three real-estate investment trusts - VICI Properties, Alexandria Real Estate and Realty Income - which are required to distribute the bulk or their taxable income to shareholders.

We used the same projected FCF criteria for the entire S&P 500, even though funds from operations (FFO) has traditionally been used to gauge REITs' ability to generate cash. FFO adds depreciation and amortization back to earnings, while excluding gains or losses on the sale of property. Adjusted funds from operations (AFFO) deducts the cost of maintaining property.

As an additional screening factor for REIT dividend coverage if analyzing projected AFFO, Lewis Altfest, the founder and CEO of Altfest Wealth Management in New York, has suggested excluding REITs for which depreciation and amortization have made up more than half the dividends paid. If we look back for one year at REITs' dividend payments, no members of this S&P 500 industry group pass this cut recommended by Altfest.

Before buying any individual stock, you should do your own research to form your own opinion about a company's ability to remain competitive over the long term. In the right-most column in the table above, you can see that half the stocks have declined this year - some of them significantly. This doesn't necessarily mean the companies' dividends are threatened, but it underscores the need for patience if you are investing in stocks, in part, for dividends.

One way to begin your research is to click on the tickers for more information.

Don't miss: 11 bargain-priced stocks of companies that have huge growth potential over the next two years

-Philip van Doorn

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