58 S&P 500 Stocks Have Dividends Higher Than Treasuries. 10 Look Better Than Bonds.

Kraft Heinz plans to break into two companies next year, separating sauces and spices from its U.S. grocery staples. (Justin Sullivan/Getty Images)

Key Points

• Dividend stocks offer an alternative for stable income as Treasury bond payouts have fallen, with the 10-year yield decreasing from nearly 4.6% to below 4.2%.
• Nearly 60 S&P 500 companies currently provide dividend yields exceeding the 10-year Treasury yield.
• Companies like Conagra, Altria Group, and Kraft Heinz are identified as potential dividend-stock winners, despite facing health-related headwinds.

Locking in stable income isn’t easy—especially with interest rates slowly coming down. Dividend stocks offer a way to secure attractive yields while still providing potential upside.

Payouts on Treasury bonds have fallen sharply this year, with the 10-year yield sliding from nearly 4.6% in January to below 4.2% today. That decline could continue next year as a softening economy pressures the Fed to cut rates.

Dividend stocks can help fill the gap. Some 58 S&P 500 companies now sport dividend yields higher than the 10-year Treasury.

Finding a stock with a juicy-looking yield can be counterproductive if the dividend ends up getting cut—a real risk when hunting for stocks with unusually high payouts.

To find stocks that could beat bonds, Barron’s screened for companies with yields that exceed 4.2% and chose 10 whose annual cash dividend payouts amount to less than 80% of free cash flow.

The good news is that investors have plenty of options. The bad news is that many of these companies are in slow-growth industries like consumer goods and real estate. Of course, if you’re looking for a bond alternative, growth may not be your prime concern.

Near the top of our list are three companies built around stable, everyday brands: Conagra , the maker of Slim Jims, Reddi-Wip, and Hebrew National hot dogs; Altria Group , which sells Marlboro cigarettes and other tobacco products; and Kraft Heinz , the cheese and ketchup giant.

These companies face health-related headwinds.

In Altria’s case, the challenge is a steadily decreasing smoking population. For packaged-food companies, it’s rising interest in healthier food options and a surge of interest in GLP-1s. Still, these are known, manageable pressures that shouldn’t pose an immediate threat to dividend payouts.

Meanwhile, efforts to offset those risks, like Altria’s push into smokeless pouches and expanded health-focused offerings from Conagra and Kraft Heinz, could provide upside. Kraft Heinz plans to split into two companies next year, separating its sauces and spice business from its U.S. grocery staples.

10 potential dividend-stock winners

Conagra Brands / CAG

Dividend yield: 8.2%
Free cash flow payout ratio: 51%
Forward price-to-earnings ratio: 9.7

Altria Group / MO

Dividend yield: 7.3%
Free cash flow payout ratio: 79%
Forward price-to-earnings ratio: 10.7

Verizon Communication / VZ

Dividend yield: 6.6%
Free cash flow payout ratio: 57%
Forward price-to-earnings ratio: 8.8

Kraft Heinz / KHC

Dividend yield: 6.6%
Free cash flow payout ratio: 61%
Forward price-to-earnings ratio: 9.7

VICI Properties / VICI

Dividend yield: 6.5%
Free cash flow payout ratio: 74%
Forward price-to-earnings ratio: 10.2

Alexandria Real Estate / ARE

Dividend yield: 6.3%
Free cash flow payout ratio: 60%
Forward price-to-earnings ratio: N/A

Realty Income Corp. / O

Dividend yield: 5.5%
Free cash flow payout ratio: 78%
Forward price-to-earnings ratio: 48

Franklin Resources / BEN

Dividend yield: 5.5%
Free cash flow payout ratio: 77%
Forward price-to-earnings ratio: 9.3

ONEOK / OKE

Dividend yield: 5.4%
Free cash flow payout ratio: 79%
Forward price-to-earnings ratio: 14

General Mills / GIS

Dividend yield: 5.3%
Free cash flow payout ratio: 58%
Forward price-to-earnings ratio: 13

Corrections & Amplifications: 58 stocks in the S&P 500 have dividend yields higher than the 10-year Treasury yield. An earlier version of this article incorrectly said it was roughly 30. In addition, General Mills trades under the symbol GIS. An earlier version of this article incorrectly identified the ticker as GM.

Write to Ian Salisbury at ian.salisbury@barrons.com