Meet the 4 S&P 500 Dividend Stocks That Yield at Least 6%. Here's My Strongest Buy of the Bunch in July.

Four stocks on the S&P 500 pay out dividends of more than 6% -- not including a couple that are real estate investment trusts (REITs), which are required by federal statute to pay out most of their income in dividends in exchange for certain tax breaks.

A 6% dividend yield is extremely high, but it is not always as good as it may appear on the surface. It may be a trap, because it's the percentage of the share price that goes to dividends. So when a stock tanks, the yield goes up if the dividend is not cut -- and that can create an unsustainable dividend payout.

Let's examine the four S&P 500 stocks with yields of more than 6%. Of Verizon Communications (NYSE: VZ), General Mills (NYSE: GIS), Pfizer (NYSE: PFE), and Kraft Heinz (NASDAQ: KHC), which of the four is the best buy and has the most sustainable dividend?

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A look at the key metrics

When examining dividend stocks, there are several metrics to consider, starting with yield. All four of these stocks have yields that are over 6%, so they are all high-yielding. Here's a breakdown -- and you'll see, Pfizer has the best yield.

• Verizon: 6.74% yield
• General Mills: 6.46% yield
• Pfizer: 7.20% yield
• Kraft Heinz: 6.40% yield

Now let's look at the payout ratio, which is the percentage of earnings that goes to dividends. A high payout ratio of 60% to 70% or more can mean the company is paying out too much to support its dividend, diverting funds from growth investments or leading to a dividend cut. Here are the payout ratios -- and Pfizer is again the winner with the lowest payout ratio of the group.

• Verizon: 57.6% payout ratio
• General Mills: 68.7% payout ratio
• Pfizer: 56.2% payout ratio
• Kraft Heinz: 62.7% payout ratio

Another thing to consider is how long the company has been increasing its dividend. This shows a long-term commitment and the financial strength to sustain the dividend. Here is how many consecutive years each has raised its dividends -- and Verizon ranks first this time.

• Verizon: 21 years in a row
• General Mills: 6 years in a row
• Pfizer: 15 years in a row
• Kraft Heinz: 0 years in a row

Verizon is the best choice

These are not the only metrics investors should consider, but they go a long way toward showing how sustainable the high dividend payout is. Based on these numbers, Pfizer and Verizon look like the best two of the bunch, with Pfizer gaining a slight edge in yield and payout ratio and Verizon showing stronger long-term dividend growth.

It's also important to look at the returns of each of these stocks, because they show whether the high yield is mostly due to the stock price tanking. Year to date (YTD), General Mills stock is down around 20%, while Pfizer is down 2%. Kraft Heinz is up 4% YTD, while Verizon is up 2%. On a total return basis, with the dividend reinvested, Kraft Heinz and Verizon lead the way, up 6% YTD.

But in the long term, only Verizon has positive returns. Over the past three years, Verizon has had an average annualized return of 4% and 11% with dividends reinvested. Over the past five, Verizon has averaged a negative 6% return, but on a total return basis, it has an average annualized return of 0.4%. Over the past 10 years, it has delivered a 2% annualized total return. Pfizer also has a positive 10-year annualized return of 1%, but the others are negative.

Based on all these factors, Verizon looks like the clear choice as the best dividend stock yielding more than 6%. Analysts generally agree: 41% rate the stock a buy, with a median price target of $50.50 per share -- indicating 22% upside.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Kraft Heinz and Verizon Communications. The Motley Fool has a disclosure policy.