It's easy to chase high dividend stocks — and even easier to lose money on them if they fall. There's a better way to find high dividend yields you can count on to make you money — which includes stocks like industrials company Global Ship Lease (GSL) and financials like Lloyds Banking (LYG) plus HSBC Holdings (HSBC).
All things held equal, when a stock falls the dividend yield rises. In other words, if you own a company with a massive yield that's rising, you're likely losing money on the underlying stock. That's not a successful long-term strategy. It's actually a common way to lose money.
What's an investor looking for high dividend stocks to do then? Find stocks with market-beating yields and shares that at least keep pace with the market long term. That way you get a rich dividend that isn't eroded by a faltering stock price.
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To help you find such opportunities, Investor's Business Daily pinpoints high dividend stocks that yield at least 3%, which is more than double the Standard & Poor's 500 (yielding roughly 1.1%). But, just as importantly, they have a stock price that at least keeps up with the market.
A rising dividend yield may simply be masking a money-losing stock. Math and the way dividend yields are calculated is why this happens. The formula for dividend yield is:
Why does this equation matter? A falling stock can make a dividend yield look great.
Let's say you buy a $30-a-share stock that pays $3 a year in dividends. You might be initially thrilled with your impressive 10% annual dividend yield ($3 dividend divided by $30 stock price). The stock's yield is 500% larger than the S&P 500's roughly 1.1% yield.
Now, the stock crashes to $15 a share and the company holds the dividend the same. Applying the same dividend yield formula, the stock's dividend yield doubles to 20%. Looks great. But wait a second, despite the higher yield, you're worse off because you lost $15 a share on the stock.
It will take five years of $3 dividend payments just to break even on your stock loss.
This is why chasing yield is often a bad idea when looking for high-dividend stocks. High yields are often a mathematical distortion of a declining stock.
Losing money on a dividend-paying stock is not just a theory. It's a common occurrence especially in a rough period for stocks when you're looking for stability. In fact, 395 stocks in the S&P 500 paid a dividend going into 2024, says S&P Global Market Intelligence. Of those dividend-paying stocks, 110, or 28%, saw their shares fall enough during the year to wipe out the entire year's dividend yield, or worse.
And that's in a good market for the S&P 500. Nearly two-thirds of dividend stocks dropped by more than their yield in a less bullish 2018. And in 2019, 9% of S&P 500 stocks that paid a dividend coming into the year were down more than that yield.
Take Walgreens Boots Alliance (WBA), one of the dividend darlings, as an example. The stock yielded 7.4% going into 2024. Shares of the drugstore chain dropped 64% though, during the year. That left investors with a net loss of more than 50%.
Keep in mind, too, companies paying high dividends can cut them when the business wanes. Occidental Petroleum (OXY) did that in 2020. Ford (F) cut its storied dividend in the first quarter of 2020 to nothing, down from the 15 cents a share it paid previously. Ford's dividend yield was 6.5% in early 2020. It's just 5.2% now.
So, if chasing yield doesn't work, what does? One IBD strategy looks for high-dividend stocks with signs of stability going for them. Specifically, these stocks have:
IBD also only looks at stocks that have at least kept pace with the S&P 500 the past five years (a 92% gain through Aug. 15, 2025). That way, owning the high-dividend stocks at least didn't cost you in lost opportunity.
Finally, stocks also must have an IBD Composite Rating of 65 or higher out of a possible 99. This means the stock and fundamentals outperform 65% of all stocks in IBD's database.
You might think no stocks can clear all these hurdles. Actually, six did.
When you've narrowed down the list of high-dividend stocks this much, it's OK to look for the top dividend yields. That title goes to Global Ship Lease. Based in the Marshall Islands, Global Ship runs containership services with 71 vessels. And it yields a lucrative 6.9%. Additionally, the company's yield is up more than 95% over the past five years.
But it's not just a high-yield wonder. The stock is up nearly 14% in the past 52 weeks. Export demand continue to swing as the economy slowly reopens from tariffs. And the stock has still outperformed the S&P 500 by 383% over the past five years.
And it's a stable company. Earnings have grown more than 43% over the past five years and by 11% in the past three. All this and a near perfect IBD Composite Rating of 94.
Lloyds continues to be a rock-solid source of dividends you can count on. Based in the U.K., Lloyds provides a variety of insurance services. The stock's shares yield 3.6%, well above the market.
Shares of Lloyds are up 214% over the past five years, or roughly 130% better than the S&P 500. Earnings grew at an 10% annualized clip the past three years and are stable. On top of this, the company boosted its dividend by more than 48% the past five years.
Now, that's a reliable dividend.
Historically financial firms show why durable earnings coupled with dividend yields can be a powerful combination. HSBC is a case in point.
The U.K.-based firm's 5% dividend yield calls out to income-seeking investors. But our analysis shows there's more to it than just a market-beating payout. Roughly 38% earnings growth the past five years and 18% earnings growth the past three show the global lender is tapping new routes of expansion. Most promising is the firm, is committed to dividend growth. HSBC boosted its dividend 100%. All this, and an acceptable IBD Composite Rating of 81.
| Symbol | Company | Indicated yield % | 3 year EPS growth rate (%) | EPS growth rate % 5 year | EPS 5 year stability factor | Dividend growth (5 year) | Comp Rating | 5-year price ch. % vs. S&P 500 | |
|---|---|---|---|---|---|---|---|---|---|
| GSL | Global Ship Lease | 6.9 | 11 | 43 | 28 | 95.6% | 94 | 383.0% | |
| BWLP | BW LPG Limited | 11.6 | 27 | 29 | 27 | 56.6% | 70 | 191.9% | |
| LYG | Lloyds Banking Group | 3.6 | 10 | 25 | 55 | 48.5% | 96 | 133.9% | |
| HSBC | HSBC Holdings | 5 | 18 | 38 | 30 | 100.0% | 81 | 112.5% | |
| OMAB | Grupo Aeroportuario del Centro Norte, S.A.B. de | 3.8 | 17 | 36 | 27 | 100.0% | 96 | 80.1% | |
| CPA | Copa Holdings | 5.5 | 42 | 137 | 99 | 58.7% | 89 | 44.8% |
Follow Matt Krantz on Twitter @mattkrantz
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