Should You Buy the 3 Highest Dividend-Paying Stocks in the S&P 500?

If you're thinking of buying dividend stocks, you're not alone. The S&P 500 just had its most substantial pullback since the Liberation Day tariffs crash, and there are plenty of macro-level signs that the economy is in trouble.

The labor market has stalled, consumer sentiment is plunging, and the housing market is frozen. A number of companies, including Walmart and Target have warned of an "affordability crisis."

At times like these, there are a number of reasons to consider dividend stocks over non-dividend-paying stocks. First, dividend stocks can reward investors without share-price appreciation and also tend to be less volatile than stocks that don't pay dividends. Though they may not have the same upside potential as some non-dividend-paying stocks, dividend stocks generally perform better when the market is falling.

If you're looking for high-yield dividend stocks, a good place to start is with the S&P 500. Keep reading to see the three highest dividend payers in the broad-market index.

Image source: Getty Images.

1. LyondellBasell (12.2% dividend yield)

LyondellBasell (NYSE: LYB) is a multinational chemical company that's now the highest dividend payer in the S&P 500 by a substantial margin. Unfortunately, the title of highest yield has come from the stock's underperformance, rather than a surge in its dividend payout.

Year to date, the stock is down 40% as it's faced a wide range of pressures, including higher input costs, weak demand for products like polypropylene, increased competition, and overcapacity in much of the world, including Asia. However, it's optimistic about a capacity rebalancing.

Nonetheless, LyondellBasell topped estimates in its third-quarter earnings report, though results were down sharply from a year ago. Revenue fell 10% to $7.72 billion, and the company reported an earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $835 million after adjustments, down from $1.17 billion in the quarter a year ago.

The company's outlook for the fourth quarter was also underwhelming, though it has sufficient cash on hand to fund its dividend. For now, the 12% dividend yield looks safe, but a sustained downturn could lead to a cut.

2. Alexandria Real Estate Equities (10% dividend yield)

Real Estate Investment Trusts (REITs) are known for paying dividends, so it shouldn't be a surprise to find a REIT like Alexandria Real Estate Equities (NYSE: ARE) on this list. Alexandria is a life-science REIT, developing megacampus ecosystems in markets across the country.

Like LyondelBasell, Alexandria stock has also fallen sharply this year, down 48%, as the company has struggled. It missed guidance, offered a weak initial outlook for 2026, taken impairments on some of its assets, faced an oversupply of properties in the life sciences sector, and experienced declining occupancy rates.

Revenue was down 1.5% in the third quarter to $751.9 million, and its adjusted funds from operations (FFO), a key figure in the REIT industry, were down from $2.37 to $2.22 in the quarter.

Alexandria has a long history of hiking its dividend steadily but seems to be holding back on raising it, due to the headwinds the business is facing. The company said that the board of directors expects to carefully evaluate its 2026 dividend strategy, a hint that it might get cut. Given the weakness in the business, Alexandria Real Estate looks best avoided in the current environment.

3. Conagra Brands (7.9% dividend yield)

Packaged-food giant Conagra Brands (NYSE: CAG) hails from another industry that has struggled this year, as shares of the owner of brands like Duncan Hines, Slim Jim, and Reddi-wip are down 36% this year. Falling sales and profitability, weak volume, and a downbeat outlook due, in part, to inflation have all weighed on the stock recently.

In the company's most recent earnings report, organic sales fell 0.6%, while adjusted operating margin compressed by 244 basis points to 11.8%, leading to a 26.4% declined in adjusted earnings per share (EPS) to $0.39.

For fiscal 2026, the company expects adjusted EPS of $1.70-$1.85. The company currently pays $1.40 in dividends, so it should be able to support that dividend, giving yield hunters a near-8% dividend yield.

However, Conagra's overall performance has been disappointing for at least a decade, so investors should temper their overall expectations for the stock.

Jeremy Bowman has positions in Target. The Motley Fool has positions in and recommends Alexandria Real Estate Equities, Target, and Walmart. The Motley Fool has a disclosure policy.