By Lawrence C. Strauss

It's well known that higher-yielding stocks can be value traps.

While those yields can be alluring, they can also signal an impending dividend cut and underlying weakness in a company's operations.

Consider the S&P 500 Dividend Aristocrats Index. Its 69 members have paid out a higher dividend for at least 25 straight years, a sign of long-term consistency and quality -- despite any shorter-term setbacks.

"When you look at the dividend aristocrats, what they are is the best screen for quality," says Jenny Van Leeuwen Harrington, CEO of Gilman Hill Asset Management.

The index's yield was recently at around 2.2%, but there are some constituents at much higher levels.

Barron's compiled a list of 10 of the highest-yielding aristocrats, including Franklin Resources, which recently yielded 5.6%; Amcor, 5.6%; Realty Income, 5.5%; T. Rowe Price Group, 5.4%; and Stanley Black & Decker, 5.1%.

Rounding out the list are Eversource Energy, 4.8%; Target, 4.7%; Chevron, 4.7%; Federal Realty Investment Trust, 4.6%; and J.M. Smucker, 4.4%.

High yields can reflect poor stock performance, and that has been the case for some of these companies. One concern is that a juicy yield could be erased by the share's price decline.

Case in point: Shares of retailer Target slid nearly 30% this year through June 23. As Barron's pointed out in March, the chain has been "fighting not just for growth but also for its place in a hotly competitive U.S. retail market dominated by innovative, well-capitalized giants such as Walmart" and others.

A consolation for Target investors is that the company recently announced that it would boost its quarterly payout by nearly 2% to $1.14 a share from $1.12. It said it was on track to increase its annual dividend for the 54th straight year. A yield of nearly 5% provides some downside protection as investors wait for Target's performance to improve.

One potential source of comfort for investors looking at these particular higher-yielders is that not too many companies get kicked out of the aristocrats index due to dividend cuts.

But companies do get booted sometimes. Examples in recent years include Walgreens Boots Alliance and VF Corp., which both slashed their payouts.

Another laggard this year is money manager T. Rowe Price. Its shares have fallen by about 15%, including dividends. But another asset manager, Franklin Resources, which recently yielded 5.5%, has returned about 15%.

Other solid stock performances this year have come from Realty Income, a real estate investment trust that has returned about 12%; Eversource Energy, up 13%; and Chevron. The global energy giant has returned about 4% in 2025.

Elsewhere, J.M. Smucker is off by about 10%, Federal Realty Investment Trust has slid by 12%, and Stanley Black & Decker has fallen by about 16%. Amcor, which makes packaging products, is down about 1%. The S&P 500 index has returned 3%.

Simeon Hyman, global investment strategist at ProShares, says that focusing on the highest-yielding aristocrats can make sense, though those securities tend to have a value tilt and are more cynical than other members of that index. "You have to walk carefully in the high-dividend-yielding space." he says.

At the same time, Hyman adds, a long record "of dividend growth is absolutely a marker of quality across all of the constituents of the [dividend aristocrats] index.

The ProShares S&P 500 Dividend Aristocrats exchange-traded fund (ticker: NOBL) tracks the index. Some investors may prefer to invest in the entire aristocrat index as a way to diversify a portfolio.

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June 27, 2025 21:31 ET (01:31 GMT)

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