Which Are the Best Dividend Stocks to Invest in from S&P 500 this Year?

Should You Buy the 3 Highest-Paying Dividend Stocks in the S&P 500?

Before you buy a high-yield stock, you need to make sure you understand the basics of the business you are buying. Buying stocks based on one aspect of a company is a mistake, but often, investors get fixated. Income-focused investors, for example, often give dividend yield too much sway in their investment decisions. That can be a mistake. Take three of the highest yielders in the S&P 500 index as a starting point. Altria (NYSE: MO), AT&T (NYSE: T), and Healthpeak Properties (NYSE: DOC) have huge yields, but they all have warts, and one looks like it could be a terrible long-term investment. Here's what you need to know before buying any of them.

Altria: Avoid businesses that are dying

Altria has a huge dividend yield of 9.3%. It has increased its dividend regularly for years. It hails from the consumer staples sector, which is generally considered a conservative area of the market. It also has a dominant position in the market it serves thanks to its ownership of an iconic brand, Marlboro. That last fact is actually the problem.

AT&T has a dominant position but a lot of debt

AT&T has a sizable 6.7% dividend yield. It has increased the dividend annually for years. It is one of a small number of large, dominant cellular communication providers in the United States. Its coverage network is large, and it would be hard and expensive for an upstart company to replace it. In other words, AT&T has an entrenched position in a business that attracts a large group of loyal customers who happily and reliably pay their monthly cellphone payments. AT&T generates a lot of cash flow to support its dividend.

Healthpeak Properties is designed to pay dividends

Healthpeak Properties is a bit different from the other two stocks here because it is a real estate investment trust (REIT). This is a business structure specifically designed to pass income generated from institutional-level rental properties on to investors in a tax-efficient manner. The high 6.6% dividend yield isn't that unusual in the REIT space. However, it is still important to understand exactly what Healthpeak Properties does.

At the end of the day, most investors will probably want to avoid Altria's high yield and slowly dying business. AT&T and Healthpeak are much better companies on which to spend your valuable time doing research. That said, both of these high-yield stocks have problems to face in the near term, though over the long term, their strong businesses will probably allow them to keep paying dividend investors well for sticking around.