Two High-Yield Dividend Stocks Just Got Kicked Out of the S&P 500
When a stock is removed from the S&P 500 index, the immediate reaction is mechanical: every index fund and exchange-traded fund (ETF) tracking the benchmark must sell it. This creates a short window of artificial selling pressure that has nothing to do with the underlying business.
For dividend investors willing to look past the noise, this moment can be worth a close look. The removal of two companies, Campbell’s and Pool Corp., from the S&P 500 index has sparked interest among investors looking for high-yield dividend stocks.
Campbell’s: The 7% Yield Story
Campbell’s carries a dividend yield north of 7% right now, making it an attractive option for income investors. The stock has been under pressure for over a year, plagued by weaker volumes, lingering costs from its 2024 Sovos Brands acquisition, and an ERP system conversion that created operational headwinds.
The dividend itself has been in place for 51 years, with a payout ratio sitting at roughly 76% of earnings. Cash-flow coverage is even healthier, providing a strong foundation for the dividend. When a 51-year dividend streak is backed by both earnings and cash flow, it carries significant weight.
Campbell’s has a strong brand equity in Rao’s, a premium brand that has crossed $1 billion in trailing-12-month net sales. The company has deepened its commitment to Rao’s by acquiring a 49% stake in La Regina, the Italian producer behind Rao’s sauces.
However, Campbell’s dividend growth has been slow, with the payout growing barely 1.26% over five years. For investors who care about income keeping pace with inflation, this is a crucial consideration.
Pool Corp.: The Dividend Growth Machine
Pool Corp.’s yield looks modest compared to Campbell’s, but the story is the trajectory. The company has raised its dividend every year for 22 consecutive years, with the dividend growing at roughly 17% per year over the past decade.
This is the compounding engine that dividend growth investors are looking for. When a company grows its earnings consistently, it can raise its dividend consistently, providing a higher yield on the original cost.
Poll Corp.’s business model is built for long-term success, with about 60% of revenue coming from maintenance and repair. The company’s proprietary platform, Pool360, now accounts for 13% of net sales and is growing, providing operational efficiency.
However, the risk worth noting is that Pool Corp. is tied to housing market activity and consumer confidence. If interest rates remain elevated and homeowners continue deferring big-ticket outdoor projects, discretionary sales will remain soft.
Both Campbell’s and Pool Corp. were pushed out by mechanical index rebalancing, not deteriorating businesses. Both stocks deserve a look that goes beyond what the index removal implies.
