UPS Stock Joins 7% Yielders in S&P 500. Here’s Who Else Is in That Dividend Club.

UPS stock now yields more than 7%. (Lindsey Nicholson/UCG/Universal Images Group via Getty Images)

United Parcel Service has joined the 7% yield club in the S&P 500.

The stock’s yield surpassed that rare level on Tuesday, after the logistics company’s disappointing second-quarter profit report triggered a 10% slide in the shares.

There are now four others in the index with 7%-plus yields: Pfizer , Conagra Brands , LyondellBasell Industries , and Healthpeak Properties, according to data from S&P Dow Jones Indices.

A 7% yield is about equal to the rate of the average junk bond and can raise questions about a company’s dividend sustainability.

The index’s former dividend leader, Dow, recently cut its payout in half and that action helped lead to a 15% drop in its stock. At around $25, the maker of chemicals now yields 5.6%

All five of the stocks with 7% yields have declined this year, but the companies have expressed support for their current payouts, with several boosting dividends this year.

These stocks can offer an alternative to corporate bonds or other taxable debt.

UPS shares, which are off another 1.5% Wednesday to $89.50 after hitting a new 52-week low, now yield 7.3%. The UPS annual dividend is $6.56 a share.

UPS’s payout ratio—or the dividend as a percentage of earnings—is about 100% based on projected 2025 earnings, but CEO Carol Tome was emphatic on the dividend during the company’s conference call Tuesday.

“UPS is rock-solid strong and so is our dividend. The UPS dividend is backed by solid free cash flow and a strong investment-grade balance sheet,” Tome said. “We know how important the dividend is to our investors and you have our commitment to a stable and growing dividend.”

The UPS dividend exceeds the 6% yield on its long-term debt that carries investment-grade, single-A credit ratings.

Lyondell now has the highest dividend yield in the S&P 500 at 8.8%. Its shares are down 18% this year to around $61 in a tough environment for chemical producers. Its earnings are expected to fall by about 50% this year to about $3.40 a share, according to FactSet.

Lyondell hasn’t reported its second-quarter results, but on its first-quarter call, CEO Peter Vanacker said: “We will continue our focus on disciplined capital allocation and cash flow optimization to maintain our commitment to a strong and growing dividend as a central component of our shareholder returns.”

The company lifted its quarterly payout by three cents in May to $1.37 a share.

Pfizer shares, at around $24, yield 7.1% and are down 9% this year. The company is due to report second-quarter earnings next week. On its first-quarter call, CFO David Denton said the company’s capital allocation strategy “consists of maintaining and growing our dividend over time; reinvesting in our business at an appropriate level of financial return; and making value enhancing share repurchases.”

Pfizer has boosted its dividend annually in recent years and its coverage of the $1.72 annual dividend is comfortable at about 60% of estimated 2025 earnings of around $3 a share.

Conagra stock is down 32% this year to around $19 and its dividend yield is now 7.3%. Its management was asked on its recent earnings conference call about the security of the dividend—given a high payout ratio and other corporate financial priorities including debt reduction.

CFO David Marberger responded: “So, we look at this as an investment year and transitory year, but we’re still able to fund the business and fund the dividend and pay down debt.”

Healthpeak Properties, which own buildings housing medical offices and lab facilities, now yields 7% with its shares trading below $18. The real estate investment trust reported second-quarter earnings earlier in July and highlighted its “well-covered and recently increased dividend.”

Healthpeak said that dividend coverage was solid at about 75% of its adjusted funds from operations, or AFFO, a REIT financial measure. The company’s AFFO coverage has improved in recent years.

A high dividend can be a warning sign about sustainability but the payouts of the five high-yielders in the S&P 500 look safe for now.

Write to Andrew Bary at andrew.bary@barrons.com