4 of the Highest Yields in the S&P 500 That Are Actually Covered

The article identifies four S&P 500 companies whose cash generation covers their dividends: Verizon (6.18% yield), Realty Income (5.67%), Altria (5.57%) and Kinder Morgan (3.51%). Reported coverage includes Verizon’s 2025 free cash flow of $19.676 billion versus $11.481 billion in dividends, Altria’s $9.074 billion versus $6.96 billion, and Kinder Morgan’s $2.891 billion versus $2.604 billion; Realty Income’s 2025 AFFO guidance is $4.44–$4.45 per share versus a $3.252 annualized dividend. The article also flags company-specific risks, including Verizon’s higher debt, Realty Income’s exposure to non-investment-grade tenants, falling cigarette volumes at Altria, and Kinder Morgan’s project-spending demands.

Analysis

The key distinction is between payout coverage and durable total return: current cash coverage can support dividends while leaving little room for deleveraging, reinvestment, or a downturn. Verify the figures against the latest filings before acting; the article mixes quarterly and annual periods, and the most recent cash-flow snapshots may not represent a normalized run rate.

Over 1–3 months, VZ has the clearest operating catalyst if subscriber gains and margin improvement persist. But incremental cash competes with debt reduction after the acquisition, limiting the case for dividend acceleration. O remains exposed to both Treasury yields and tenant credit: stable occupancy is not a sufficient hedge if refinancing costs rise or weaker tenants fail. MO’s payout is better insulated near term by pricing and low reinvestment needs, but falling cigarette volumes raise the risk that price increases eventually accelerate consumer substitution. KMI benefits from structural gas demand, yet a large backlog is not distributable cash until projects are completed and earning; construction spending can temporarily tighten coverage.

Contrarian point: a covered dividend is not necessarily a mispriced security. KMI’s sharp rerating has reduced its income appeal, while O’s discount may be compensation for rate and tenant-credit exposure rather than an obvious bargain. The article offers limited evidence on forward free cash flow, maturities, or project returns, so treat payout safety as a monitoring framework—not a buy signal.

Key Decisions for Investors

• Relative-value watch, 1–3 months: consider long VZ versus short O only if VZ sustains subscriber and margin gains while Treasury yields remain elevated. The thesis is relative operating momentum versus O’s duration and tenant-credit sensitivity, not that VZ is debt-free. Reassess if VZ’s operating metrics reverse or O’s funding costs and tenant collections improve enough to close the relative-performance gap.
• Do not chase KMI after its rerating solely for dividend growth. Revisit on a pullback or after evidence that major projects are entering service and lifting operating cash flow; falsify the thesis if construction spending keeps cash coverage below distributions or project schedules slip.
• Keep MO as a conditional income exposure rather than a structural-growth holding. Track cigarette volume declines, Marlboro share, and evidence of consumer substitution; faster volume erosion that pricing cannot offset would weaken the payout thesis even before a dividend cut.
• Before sizing any yield position, verify latest reported free cash flow or AFFO, maintenance versus growth capex, debt maturities/refinancing costs, and—especially for O—tenant credit-loss trends. If those do not confirm forward coverage, there is no compelling trade from this article alone.