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Russian (RU) Fri, Aug 15, 2025, 12:31 PM 7 min read
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Even if a company delivers bad results for a few quarters, that doesn't necessarily mean it won't be able to keep paying its dividend.
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However, a high yield can be a result of poor stock performance, which in turn could signal business problems that put the company's dividend at risk.
As the stock market continues to hit new all-time highs, investors who are worried that a pullback could be looming may want to look for strong dividend stocks, which can provide reliable streams of passive income even if share prices slide. And those who have ambitious goals for their returns may be eyeing those with unusually high yields.
But should you buy the three highest-yielding dividend stocks in the S&P 500 now? To start to answer that question, investors should weigh their track records and financials.
Right now, the highest-yielding stock in the S&P 500 by far is the chemical giant Dow (NYSE: DOW). Now, investors should keep in mind that a high dividend can often be a sign of more fundamental issues with a company's business. When a stock's price falls, its yield automatically rises -- until and unless the actual payout gets cut. But before that occurs, it can lead to a trailing yield that looks extremely tempting.
Dow seems to fit this mold. Its stock price is down by more than 45% so far this year. The company has struggled as new competitors have oversupplied the market with some of its products. Tariff and trade war concerns haven't helped its business either, and management is now preparing for a macroeconomic environment in which it books lower normalized earnings.
In the second quarter of 2025, Dow reported a roughly $800 million loss after a $458 million profit one year prior. Revenue fell over 7% year over year. The company also announced actions to shore up its bottom line, laying off thousands of employees and slicing its quarterly dividend in half to $0.35 per share.
Even at that lower payout, Dow's annualized dividend yields 6.45%. "The dividend is a key element of our investment thesis, and that is not changing," CEO and Chairman Jim Fitterling said on the second-quarter earnings call. "We remain committed to targeting a competitive dividend across the economic cycle."
Unfortunately, that payout may not be sustainable. Based on the new amount, its annual payouts would amount to about $1 billion. The company had about $2.4 billion of cash and equivalents at the end of the second quarter. But it also had over $16 billion of long-term debt, and its free cash flow through the first six months of the year was only around $1.7 billion. Things could certainly improve, and I know management wants to keep rewarding its shareholders, but it's unclear right now that it will be able to maintain it, so I would avoid the stock at this time.
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