5 Best Dividend Stocks in the S&P 500

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Income investors rarely chase the loudest headlines. They look for companies that mail out checks, no matter what the talking heads predict for next quarter, and the S&P 500 is still the most convenient hunting ground for that kind of reliability.

The index has been shifting more towards growth due to the mega-cap stocks doing extremely well over the past three years, and then being joined in by a new group of AI stocks that have ballooned into the top rankings. However, it also has some of the best dividend stocks you can find.

The challenge is that the highest yields often sit on businesses whose earnings are shrinking faster than their share price, so a fat number on the screen can be a trap rather than a treat. The following five dividend stocks get you a great yield that is both rising and sustainable.

Realty Income (O)

Realty Income (NYSE:O) is called “The Monthly Dividend Company” for good reason. It has been consistently returning cash to its shareholders while increasing the payout. The company is a real estate investment trust. Nevertheless, its clients are often stable retail companies that can weather downturns and keep growing.

Realty Income has been able to declare 664 consecutive monthly dividends and is recognized as a Dividend Aristocrat stock for that long record.

On top of that, Realty Income’s occupancy rate is among the highest in the REIT industry. Even in 2008, the occupancy rate stood at 97%. If it can pay dividends through the most intense recession to hit the real estate market in modern history, it can keep them rising during good times.

You get a 5.39% dividend yield. The payout ratio is very sustainable at 75.45%.

Verizon (VZ)

Many would scoff at Verizon (NYSE:VZ) if it were portrayed as a good dividend stock two years ago. Today, the scenario has completely shifted. This telecom company had a boatload of debt on its balance sheet during one of the most aggressive periods of interest rate hikes, but managed to keep dividends flowing.

Now, as interest rate cuts go down and the AI rally becomes the market’s main focus, VZ stock is becoming a very lucrative opportunity. Its stock has traded sideways year-to-date, but interest rate cuts directly help the company’s bottom line, plus the AI build-out is leading to more demand for Verizon’s extensive infrastructure.

I expect VZ stock to follow in the footsteps of AT&T (NYSE:T) stock in the coming quarters.

In the meantime, you get a 6.85% forward dividend yield that has grown for 21 consecutive years. The icing on the cake is that Verizon’s dividend payout ratio is just 57.66%. As debt servicing eases, Verizon will be left with even more room for dividend hikes.

Duke Energy (DUK)

Duke Energy (NYSE:DUK) is a big electric and gas company that keeps the lights on and the gas flowing for its 7.5 million electric customers and 1.6 million gas customers across six states, mainly in the Southeast and Midwest.

It’s one of the best dividend stocks you can buy in the current environment, thanks to tariffs plus interest rate cuts. Lower Treasury yields are making the 3.32% forward yield increasingly juicier when you consider the rate base growth.

It has a 5-year CapEx plan of $87 billion to boost growth and margins, with regulators being wooed to approve better rates in exchange for those investments in their states.

Furthermore, the Trump-2 admin wants “energy dominance” and is expediting transmission projects to keep up with demand from AI data centers.

The payout ratio is 66.45%, and the company has had 14 consecutive years of dividend growth on record.

Coca-Cola (KO)

Coca-Cola (NYSE:KO) is a no-brainer pick for any portfolio of blue-chip dividend stocks. This company is often the first that comes to mind when you think about dividend payers with lasting power. Coca-Cola’s presence is worldwide, and the moat is too strong to ever crack.

KO stock has been on a consistent trajectory for the past two decades. In all likelihood, the next two decades will bring more of the same, which is exactly what you want if you plan to buy, reinvest, and snowball your dividend investments.

It also acts as a ballast for your portfolio due to how defensive the business is. Having a Coke after every meal is a habit not many people can give up on.

You get a 2.86% dividend yield with a payout ratio of just 16.33%, meaning there’s massive room for significant payout hikes. There are 62 consecutive years of dividend growth on record.

Merck (MRK)

Merck (NYSE:MRK) makes and sells prescription medicines and vaccines. The company’s financial footing is strong, and you get a great buying opportunity today, as MRK stock trades at a 33%-plus discount from early 2024.

Investors are increasingly concerned about the impending patent expiration of Keytruda

Gardasil sales have also declined in China, and the guidance given in Q4 2024 for this year was disappointing.

Merck is preparing prematurely by accelerating drug development, with a pipeline of 20 “potential new blockbuster drugs… could generate over $50 billion in future revenue”. Plus, its ADC platform is turning out to be a significant growth driver.

This is a quality name, and analysts expect 16.25% EPS growth in 2025. That’s along with sales growing 1% this year and accelerating growth to 4.88% next year.

You get a 3.7% forward dividend yield with a payout ratio of just 41.36%. There have been 14 consecutive years of dividend growth.

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