The Top 10 S&P 500 Dividend Stocks for March

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A lot sure has changed since the last time we looked at the Top 10 S&P 500 dividend stocks, and almost all of those changes are good. About a month ago, the S&P 500 was down nearly 6% for the year-to-date, and everyone was getting nervous about what it would take for stocks to arrest that slide.

Cut to today, and anxious chatter about a full-blown correction has quieted down. That’s what happens when the broader market rises more than 4% in a month to once again hit record highs. Stocks are positive for the year-to-date, and we’re celebrating a gain of 177% for the S&P 500 on the bull market’s fifth anniversary.

There’s not much downside to any of this, but it does make investing in dividend stocks a little trickier. After all, yields on dividend stocks decline as share-price rises. The yield on the S&P 500 currently stands at 1.92%. A year ago, it was at 2.14%

At the same time, bond have sold off, meaning yields on fixed income are higher now than they were a year ago. As a result, dividend stocks have more competition for buyers these days. (Bond prices and yields move in opposite directions.) The yield on the benchmark 10-year Treasury note is up to 2.79% from 2% around this time last year.

So yield is getting a bit harder to come by among dividend stocks, and they could see some rotational selling as investors look elsewhere for income. And yet, some dividend stocks in the S&P 500 still throw off gushers yields. Indeed, some of the yields on these dividend stocks would make junk bonds blush.

To get a sense of what's out there among high-yield dividend stocks, here are the top 10 S&P 500 dividend stocks for March. (Note: All dividend yields are as of 10 a.m., Mar. 11.)

#10: Transocean (RIG)

RIG Dividend Yield: 5.29%

Transocean (RIG) breaks into the top 10 dividend stocks this month. Surprise, surprise, Transcocean is an oil and gas driller, the kind of company that’s usually good for generous payouts. Unfortunately for anyone holding Transocean stock, the dividend yield climbed this high only because the stock has fallen so far. It’s off about 15% for the year-to-date.

But that does afford some opportunity for new money, which can get in on the 5.29% dividend yield — and a much cheaper stock. Transocean now trades for a bit more than 7 times forward earnings — half as expensive as the broader market.

#9: Teco Energy (TE)

TE Dividend Yield: 5.42%

Like oil and gas drillers, utilities are a fountain of dividend income. Teco Energy (TE) broke into the top S&P 500 dividend stocks last month and the yield has barely budged since then — and neither has the stock. TE is still down about 6% so far this year.

But the TE stock slide does appear to have been arrested, thanks to the extended deep freezes that hit so much of the country during winter. Increased demand gave natural gas prices a pick up after languishing near historic lows for more than a year.

#8: Health Care REIT (HCN)

HCN Dividend Yield: 5.42%

Real estate investment trusts (REITs) are required to pay out most of the earnings as dividends in exchange for certain tax benefits, which is why so many of them make lists of top dividend stocks. With a consistently high dividend yield, Health Care REIT (HCN) has become a staple of this list.

HCN enjoys a solid portfolio of senior housing, long-term care and medical office facilities, but an acquisition spree has greatly increased costs. Still, that hasn’t hurt the share performance this year. HCN stock is up 9.6% for the year-to-date, beating the broader market by a wide margin.

#7: Pepco Holdings (POM)

POM Dividend Yield: 5.51%

Pepco Holdings (POM) is another electric and gas utility that throws off a big yield. Rising prices for natural gas and electricity — which move together — have given POM stock a little buoyancy, too. Pepco stock is up 2.4% for the year-to-date.

Pepco beat Wall Street’s fourth-quarter profit estimate, helped by higher electric distribution revenue, and set a full-year target of $1.12 to $1.27 per share. And although gas prices are headed lower ahead of spring, POM stock derives most of its revenue from electricity, which sees a spike in demand every summer.

#6: AT&T (T)

T Dividend Yield: 5.7%

Telecommunications are another sector to look at for generous dividend  stocks, such as AT&T (T).

The most interesting news out of T stock recently is that it's slashing prices — again — as its price war with T-Mobile U.S. (TMUS) heats up. AT&T customers can sign up for a 2-gigabyte data plan for $65 per month, down from $80. And adding a second phone lifts the total to $90, down from $105. As much as the price war might help T’s market share, it doesn’t help the share price. T stock is down 8% so far this year.

#5: Ensco (ESV)

ESV Dividend Yield: 5.78%

Ensco (ESV), a U.K.-based oil and gas exploration company, maintains a place on the top 10 S&P 500 dividend stocks for a third consecutive month, even though the yield slipped to 5.78% from 5.9% a month ago.

Despite its prominence in the industry, ESV stock has been having a crummy year. It's off more than 9% for the year-to-date and can’t expect much help from higher oil prices anytime soon. The slide is deep enough that adding in the big dividend yield still brings the ESV stock total return to -8.7%.

#4: HCP (HCP)

HCP Dividend Yield: 5.83%

HCP (HCP) is another REIT that's no stranger to the list of top dividend payers. And between a dividend hike and a sagging share price over the last month or so, the dividend yield on HCP stock is up from 5.6% a month ago.

HCP stock is having a fine year for a big dividend payer, putting up a gain of 3% so far in 2014. That’s not bad for a stock that offered up disappointing full-year guidance, despite beating the Street on fourth-quarter earnings — helped by higher revenue, not cost cuts.

#3: CenturyLink (CTL)

CTL Dividend Yield: 7.02%

Here we go again. CenturyLink (CTL), kicks off the short list of telecom stocks that always own the top spots for dividend stocks with their crazy-high dividend yields and poor price performance. CTL stock is down 3.2% so far this year, bouncing back after being off more than 10% in early February.

That rebound knocked the dividend yield down from 7.5% a month ago, but it’s still remarkably high for a dividend stock. However, in the longer term, CTL stock has been awful, losing 24% of its value in three years. CTL is betting on an Internet-based TV broadcast service, but it will have to get working soon to stop this slide.

#2: Frontier Communications (FTR)

FTR Dividend Yield: 8.21%

Frontier Communications (FTR) is another long-suffering dividend stock with an almost insane yield. FTR stock has lost about 7.5% over the last three years and isn’t doing much to claw that back.

For the year-to-date, FTR stock is up 4.5%, which is pretty good, even though the volatility has been nauseating. However, after some up and down quarters, Wall Street expects FTR to eke out a slight increase in earnings per share for the full fiscal year. That leaves a glimmer of hope that FTR might one day dig its way out of this hole.

#1:  Windstream Holdings (WIN)

WIN Dividend Yield: 12.25%

As always, Windstream Holdings (WIN) is the champ of dividend stocks in the S&P 500, although the dividend yield has come down from above 13% a months ago.

Like CTL stock and FTR stock, WIN stock is a telecom that’s done little but sell off over the last three years. But, hey, for the year-to-date, WIN stock has a total return of about 1%.

At some point, you figure the good times of amazingly high yields, have to come to an end. After all, Windstream is highly leveraged and pays out more in dividends than it makes in earnings. Then again, if it weren’t a risky stock, the WIN stock dividend yield wouldn’t be higher than most junk bonds’.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.