To The Moon

Among $S&P 500(.SPX)$ components, stocks with the highest dividend yields always draw the most attention, especially from investors seeking stable cash flow. Yet a high dividend yield is not always a sign of a company’s sound operations; instead, it may result from a sustained drop in share price—a phenomenon known as a dividend trap.

Currently, the top five dividend-yielding stocks in the S&P 500 all boast yields well above 6.4%, with LyondellBasell leading the pack at an astonishing 9.3%. But behind these tempting figures lie hidden risks. Are these stocks undervalued gems or ticking traps? This article breaks down each one in turn.

What Is a Dividend Trap?

Simply put, a dividend trap refers to a stock with an abnormally high dividend yield driven by a sharp plunge in its share price, rather than an increase in the company’s dividend payouts. More dangerously, a lofty dividend yield often masks a deterioration in the company’s fundamentals. Investors who buy in may face a double blow: a continued decline in share price and even potential dividend cuts in the future. Therefore, before chasing high dividends, it is essential to closely examine a company’s payout ratio, free cash flow, debt levels and business prospects.

Analysis of the S&P 500’s Top 5 Dividend-Yielding Stocks

$LyondellBasell Industries NV(LYB)$ — Dividend Yield: 9.3%

LyondellBasell is a global leader in the production of plastics, chemicals and refined products, whose offerings are widely used in packaging, automotive, electronics and other industries. The company benefits from steady underlying demand and relatively limited competition, but as a cyclical industry player, its performance is highly correlated with economic conditions.

Red flags to watch: While management raised the quarterly dividend to $1.37 in 2025—nearly doubling the 2014 level—LYB’s share price has plummeted by nearly 50% over the past five years. Though the stock has rebounded by about 30% since 2026, its long-term slump is hard to ignore. High dividends in cyclical industries are often unsustainable; during an economic downturn, shrinking profits may force the company to cut its dividend. The current 9.3% yield partly reflects market concerns about its future profitability.

Conclusion: A classic cyclical high-dividend stock, whose yield has been inflated by a sharp share price drop. Despite a recent recovery, investors need to be wary of a potential industry cycle reversal. A slowdown in the economy would test the safety margin of its dividend.

$ConAgra(CAG)$ — Dividend Yield: 7.3%

Conagra owns a host of household food brands, including Bird’s Eye, Orville Redenbacher and Swiss Miss. Yet this packaged food giant is grappling with dual pressures from rising costs and shifting consumer preferences.

Red flags to watch: CAG’s share price has fallen by nearly 30% in the past year and about 45% over five years. More worrying is its sky-high payout ratio of around 80%, meaning the company devotes most of its profits to dividend payouts, leaving minimal room for reinvestment and crisis preparedness. A drop in earnings would inevitably lead to dividend cuts. Furthermore, there has been no significant improvement in the company’s fundamentals, and it remains unclear whether management can turn the tide.

Conclusion: While the dividend yield is high, the exorbitant payout ratio and prolonged share price decline fit the classic hallmarks of a dividend trap. Investors must closely monitor its free cash flow and debt position, as the current yield is likely unsustainable.

$Healthpeak Properties, Inc(DOC)$ — Dividend Yield: 7.1%

As a real estate investment trust (REIT), Healthpeak primarily invests in medical office buildings and senior living communities, owning nearly 700 properties. REITs are typically required to distribute most of their profits to shareholders, resulting in generally high dividend yields.

Red flags to watch: Investor concerns stem from uncertainty surrounding healthcare policies (such as pressure on Medicaid spending) and the company’s high debt levels. Healthpeak plans to spin off part of its assets (Janus Living) via an IPO, a move that will alter its future dividend structure. In the meantime, the stock has posted a double-digit drop in the past year, reflecting market skepticism about the spin-off and the company’s prospects. While REIT dividends offer tax advantages, policy risks and reduced financial flexibility could threaten dividend stability.

Conclusion: Hidden behind the high dividend are policy risks and debt pressures, coupled with uncertainties from the spin-off, casting doubt on the safety of DOC’s dividend. Investors should wait for more details on the spin-off before making a decision.

$The Kraft Heinz Company(KHC)$ — Dividend Yield: 6.5%

Kraft Heinz is a consumer goods giant with a portfolio of well-known brands. However, the company has been saddled with heavy debt since its merger with Heinz a decade ago, and its share price has plummeted by more than 70% from its post-merger peak.

Red flags to watch: The company cut its dividend in 2019, and its quarterly payout has since remained flat at 40 cents with no growth. While the new CEO has stated that past problems "are fixable", the stock still fell by over 20% in the past year. The market lacks confidence in the company, and investors are also unsettled by its debt woes and frequent executive turnover. The current high dividend yield is largely a product of the falling share price, not an improvement in operational performance.

Conclusion: With a history of dividend cuts and a persistently slumping share price, KHC is undoubtedly a classic dividend trap. Unless the company can significantly reduce its debt and restore growth, investors should not be lured by the current 6.5% yield.

$HP Inc(HPQ)$ — Dividend Yield: 6.4%

HP is a globally renowned manufacturer of personal computers and printers, but the company is under pressure from long-term slowing industry demand and supply chain uncertainties.

Red flags to watch: HPQ’s share price has halved in the past year, causing its dividend yield to rise passively. While the company has steadily raised its dividend in recent years—from 19.4 cents per quarter in 2021 to the current 30 cents—the sharp share price drop has offset dividend gains. Investors need to weigh the relationship between dividend growth and weak share price performance. A continued contraction in the PC market could hurt the company’s earnings, making future dividend growth unsustainable.

Conclusion: HPQ’s situation is relatively complex. While it has a track record of dividend growth, the sharp share price drop warns of uncertainties in its business prospects. The current 6.4% yield is somewhat attractive, but investors must closely monitor whether the company’s transformation strategy can deliver results.

Summary: High Dividends Do Not Equal Safety

The analysis of these five stocks shows that high dividend yields are often accompanied by high risks. Aside from LyondellBasell, whose share price volatility stems from cyclical factors, the other four stocks all face issues such as deteriorating fundamentals, heavy debt or excessive payout ratios—checking multiple boxes for a dividend trap. When screening high-dividend targets, investors should never focus solely on yield figures; instead, they must conduct in-depth analysis of a company’s dividend-paying capacity, cash flow health and long-term growth prospects.

In contrast, companies with a track record of consistent dividend growth, a reasonable payout ratio and sound operations, even with less eye-catching dividend yields, tend to deliver more reliable long-term returns. Rather than chasing potentially illusory high dividends, it is better to invest in a stock with a solid dividend track record albeit a lower yield. On the current S&P 500 high-dividend ranking, these top 5 stocks should arguably be labeled "high-risk" rather than "treasures".

For SG users only, Welcome to open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with unlimited trading on SG, HK, and US stocks, as well as ETFs.

🎉Cash Boost Account Now Supports 35,000+ Stocks & ETFs – Greater Flexibility Now

Find out more here.

Complete your first Cash Boost Account trade with a trade amount of ≥ SGD1000* to get SGD 688 stock vouchers*! The trade can be executed using any payment type available under the Cash Boost Account: Cash, CPF, SRS, or CDP.

Click to access the activity

Other helpful links:

• 💰Join the TB Contra Telegram Group to Get $10 Trading Vouchers Now🎉

• How to open a CBA. How to link your CDP account. Other FAQs on CBA. Cash Boost Account Website.