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

Dividend investors often perform a simple screen when looking for stocks: rank the S&P 500 index (SNPINDEX: ^GSPC) by yield, from highest to lowest. The top names on the resulting list are often a collection of companies that need a lot of additional scrutiny.

Right now, the top three are LyondellBasell Industries (NYSE: LYB), Alexandria Real Estate Equities (NYSE: ARE), and Conagra Brands (NYSE: CAG). You shouldn't buy any of them before you understand the reason for their lofty yields.

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1. LyondellBasell has more bad news to come

LyondellBasell is a chemicals company. Management has been open about the headwinds it is facing, highlighting in the third quarter of 2025 that "LYB continues to navigate a challenging market environment while remaining focused on delivering long-term value." When a quarterly earnings release starts like that, you know it's going to be a tough read. It was.

For starters, the company announced one-time write-offs totaling $3.78 per share. Not surprisingly, that pushed the bottom line of the income statement into the red. However, even if you remove the one-time charges, earnings still declined a huge 47% year over year. Through the first nine months of 2025, earnings dropped nearly 64%. And management warned that the fourth quarter is normally a weak one for the company, so LyondellBasell's results aren't likely to see a big improvement when it reports final 2025 financial results.

Investors have put this stock in the doghouse for a reason. So far, the dividend has been supported, but it wouldn't be surprising if the board of directors decides to cut the dividend in 2026. Earnings would have to quickly return to 2024 levels for LyondellBasell's dividend payout ratio to get back below 100%. The chemicals industry tends to be cyclical, so a big turnaround is possible, but most dividend investors probably won't want to bet on it. The massive 11.4% yield probably isn't worth the risk.

2. Alexandria Realty shouldn't be on this list

Alexandria Realty is worth discussing for two reasons. First, the medical office real estate investment trust (REIT) cut its dividend in early December 2025. The pay date on that lower payment is in mid-January 2026. This brings up the second point: The yield that most quote services show is around 8.6%, even though that's not what the yield will be after the next dividend payment is made. Essentially, the listed yield isn't real. If you adjust for the dividend cut, the forward yield is around 5.3%.

This is a timing issue related to maintaining large and complex databases. Nobody is doing anything wrong, but it highlights the need to dig deeper when you see a significant yield. It may not be what it appears to be.

That said, Alexandria Real Estate is probably not a bad REIT to consider now that the board of directors has reduced the dividend. It buys up research-focused property assets, a unique niche within the medical office sector. It is, perhaps obviously, going through a weak patch. However, the dividend cut should give management the breathing room it needs to work through the problem and return to a growth mode. Still, that means this is a bit of a turnaround story, which may only be suitable for more aggressive investors.

3. Conagra isn't an industry-leading business

Conagra is a packaged food company. It owns some well-known brands, such as Slim Jim, but it isn't a true industry leader. In fact, many of its brands are second-tier offerings in the consumer staples sector. That's not inherently a bad thing; there's got to be a No. 2 or 3 (or 4) brand if there's going to be a No. 1 brand. Even competitors lower down the leadership ranks can be profitable businesses.

Unfortunately, Conagra didn't make money in the first half of fiscal 2026. To be fair, there were material one-time charges that pushed it into the red. Remove those charges, and the company earned $0.89 per share in the first six months of fiscal 2026. That leads to a payout ratio of nearly 85%, which is kind of high. There's a clear reason why Conagra's yield is 8.4%.

Typically, investors view consumer staples stocks as resilient, safe-haven investments. If that is what you are looking for, you should probably keep looking. Conagra is more appropriate for investors willing to take on higher risks.

The top three S&P 500 dividend stocks aren't compelling

When you step back and look at LyondellBasell, Alexandria Real Estate, and Conagra Brands, it is hard to suggest you've found investment diamonds in the rough. They all come with material issues that should probably leave them off your buy list.

Of the trio, dividend-cutter Alexandria is likely to be the most attractive to dividend investors. The only problem is that the dividend cut means the yield is 5.3%, not the 8.6% most quote services will list until the next dividend gets paid. Conagra would be the No. 2 option, but conservative investors would probably be better off looking at lower-yielding consumer staples stocks with stronger business fundamentals.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alexandria Real Estate Equities. The Motley Fool has a disclosure policy.