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When stocks come with 9% dividend yields, it’s almost always a sign investors are concerned about something. But the market isn’t always right – and when it’s not, they can be huge opportunities.
Both the FTSE 100 and the S&P 500 have shares with eye-catching yields right now. And investors looking for long-term passive income should take a closer look at both.
LyondellBasell Industries
At 9.5%, LydonellBasell Industries (NYSE:LYB) has the highest dividend yield in the S&P 500. And it’s a classic one for investors – the yield is up because the stock is down, so is the dividend safe?
The firm is a chemicals business that’s in a downturn. Weak demand due to faltering industrial activity has compressed margins, but the bigger issue has been supply competition from China.
Over the last 12 months, the company’s free cash flow has been nowhere near enough to cover its dividend. And that means there’s a real risk of lower distributions – and the market knows it.
A dividend cut isn’t guaranteed though, and there are reasons for positivity. One is that there are signs of a recovery in US industrial activity coming from January’s ISM Manufacturing PMI data.
Source: Trading Economics
The figure came in at 52.6, which is its highest level in three years and a strong sign of growth. And to add extra weight to this, the supply side of the equation is starting to improve in China.
Tax policy has actually forced some of China’s less efficient operations to shut down, reducing competition. Given this, I think the 9.5% dividend yield is definitely worth a closer look.
Admiral
From the FTSE 100, Admiral (LSE:ADM) is a very different case. The £2.36 per share the firm returned in 2025 is an 8.3% yield at today’s prices, but that’s definitely going to be lower in 2026.
The company has announced a shift in its capital allocation policy. Instead of issuing new shares to fund employee compensation, it’s going to use the special dividend to finance this.
That’s going to mean cash returns are lower going forward. But it doesn’t represent a sense in which the business is fundamentally any worse – in fact, it might be the opposite.
Buying its own shares instead of paying dividends might be more tax-efficient for investors. And the company’s core strength is the profitability of its underwriting, which isn’t affected by the change.
One risk is that the UK car insurance industry is under pressure right now. Higher repair prices and lower premiums are set to weigh on margins, which is why analysts have been downgrading the stock.
They might be right, but I think Admiral is in a better position to cope with a downturn than most. And while income investors might want to look elsewhere, I’ve started buying the stock in my ISA.
High yields, high risk?
Warren Buffett’s point that investors pay a high price for a cheery consensus is absolutely true of dividend stocks. High yields almost always reflect concern about the underlying business.
Sometimes though, the concern can be unjustified due to a short-term issue that the market is unable to see past. And when that happens, investors can find rare and lucrative investment opportunities.
