Meet the Highest-Yielding Stock in the S&P 500. Does Its 10.2% Yield Make It a No-Brainer Buy for Dividend Investors?

Conagra (NYSE: CAG) operates in the consumer staples sector, a market segment generally considered a safe haven for dividend investors. However, the stock's 10.2% dividend yield is an important signal of risk. For reference, the S&P 500 index (SNPINDEX: ^GSPC) is yielding just 1%, while the average consumer staples company yields 2.1%. You need to dig in a little more before you buy this ultra-high-yield food maker.

Investors are pricing in a dividend cut at Conagra

At this point, Wall Street appears to expect Conagra to cut its dividend. Given the well-above-peer-average yield, the cut could be 50% or more. As a dividend investor, you need to heed the market's warning and carefully consider the possibility of a cut.

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On the surface, the risk seems modest. The company posted adjusted earnings of $0.39 per share in the fiscal third quarter of 2026 and paid a per-share dividend of $0.35. That's tight, but there's still some wiggle room.

The problem is that Conagra isn't performing particularly well as a business right now. Adjusted earnings fell more than 20% year over year in the quarter. There are industry headwinds that every consumer staples maker is facing, including inflation, budget-conscious consumers, and regulatory changes. But Conagra's portfolio is not industry-leading, with its best-known brand likely being Slim Jim.

Moreover, the company has material debt. In fact, in its fiscal 2025 10k, the company provided a lengthy warning about its indebtedness, highlighting that debt could "negatively impact our ability to pay a cash dividend at an attractive level." At the time of that report, the company had $4.5 billion in debt coming due between 2026 and 2029. It actually increased its fiscal 2026 debt-repayment plans in the fiscal third quarter, clearly showing that management is aware of the leverage issue.

Dividend risk just increased some more

The risks outlined above should probably be enough to keep conservative income investors away from Conagra's ultra-high-yield stock. But on April 13, the risk of a dividend cut rose further after the company appointed a new CEO. Very often, new CEOs come in and try to wipe the slate as clean as possible. That sets the new CEO up for long-term success by allowing them to effectively reset the bar at a lower level. One easy reset is to cut the dividend. And notably, in the case of Conagra, it would allow the company to allocate more money toward debt reduction, an existing and important goal.

It is entirely possible that Conagra's board of directors stands by the dividend. But given the industry headwinds, the company's recent performance, and its debt levels, dividend investors shouldn't be surprised if the new CEO asks the board to cut the dividend.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.