Should You Buy the S&P 500's Highest-Yielding Dividend Stocks Heading Into 2025?

I'll never get tired of praising dividend stocks as the market's unsung heroes. While they aren't as sexy as high-flying growth stocks, they can be just as effective at making investors money.

The steady income from dividend stocks can also help cushion investors against the inevitable volatility of the stock market. Whether prices are up, down, or stagnant, you can count on receiving your monthly or quarterly payouts (in most cases).

As we head into 2025, it's never too early to begin thinking about which dividend stocks could make sense for your portfolio, especially those with attractive dividend yields. Below are the S&P 500's highest-yielding stocks:

Source: . Dividend yields as of Dec. 6.

Despite the high dividend yields, not all these companies are worth investing in heading into the new year. Let's take a look at where each stands.

Image source: Getty Images.

1. Walgreens Boots Alliance

On paper, an 11.8% dividend yield seems like an income investor's dream. However, when you look at why Walgreens Boots Alliance's yield is that high, you'll see where the problem lies -- especially considering the company cut its quarterly payouts by 48% to $0.25 early this year.

Through Dec. 6, the stock price of Walgreens Boots Alliance has dropped by more than 68% in 2024.

There hasn't been much encouraging news coming from the company lately. Its operating loss in its fiscal 2024 was $14.1 billion, it plans to close around 1,200 stores in the next couple of years, and competition from the likes of Amazon and Walmart is steadily increasing. Needless to say, none of those facts are sparking optimism among investors.

The investment thesis gets even worse when you consider the appeal of the stock has been its dividend, and even that seems to be in jeopardy. Walgreens Boots Alliance distributed $1.3 billion in dividends in fiscal 2024 while being leagues away from making a profit. That's a recipe for another dividend cut to be on the horizon.

WBA Total Dividends Paid (Annual) data by YCharts. Negative numbers represent payouts.

Whether Walgreens Boots Alliance will dial back its dividend again or even suspend it entirely remains to be seen, but it's not a stock I'd feel comfortable investing in heading into 2025.

2. Altria Group

Tobacco giant Altria has routinely been one of the S&P 500's highest-yielding dividend stocks. The stock is up by close to 37% this year (as of Dec. 6), which makes its yield of around 7% -- more than five times the S&P 500's average -- even more impressive.

Some of Altria's stock success this year can be attributed to its progress in its non-cigarette categories such as vapor, with its recently acquired product, NJOY.

That is important because adult smoking rates in the U.S. have steadily declined. According to the Centers for Disease Control and Prevention, in 2021, the percentage of U.S. cigarette smokers had dropped to around 11.5% (it was 20% in 2005).

Altria is by far the country's largest cigarette producer, so this decline in smoking rates has a tangible effect on its business. However, it has offset the impact of declining cigarette sales volumes by raising its prices per pack. (Cigarette costs typically aren't the chief reason why people quit smoking.)

That's far from a long-term solution, but it has kept the company's financials relatively stable.

MO Revenue (Annual) data by YCharts.

Altria is a stock you can feel comfortable buying going into 2025, but it will be important for shareholders to monitor its progress (or lack thereof) in its non-cigarette categories. How those businesses fare will be key to its long-term success.

3. Pfizer

Pfizer's stock is down quite a bit since its late 2021 high of just over $61, but it's not time to ring the alarm bells yet.

Much of Pfizer's recent financial success came from its COVID-19 vaccine and antiviral drugs, but the company has been continuing to diversify its lineup and expand its operations. Through the first three months of 2024, it spent $7.8 billion on internal research and development projects.

When Pfizer hiked its dividend in December 2023, that marked its 15th consecutive year of increases, and there's no reason to believe it won't keep the streak going. Over the past decade, it has increased its payouts by 50%.

PFE Dividend data by YCharts.

Pfizer has a lot of long-term potential, especially as it continues to expand its business and become less reliant on a handful of products for revenue.

If you're looking to get exposure to the healthcare sector, Pfizer is a stock with a lot of upside potential and relatively low downside risk. And its above-average yield should help investors practice a bit of patience as management works to find new sources for growth after the sharp sales rise and subsequent decline connected to its COVID-related products.

Should you invest $1,000 in Altria Group right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Pfizer, and Walmart. The Motley Fool has a disclosure policy.