By Ian Salisbury
The S&P 500 has a new dividend yield king. It is a somewhat dubious honor, but the new incumbent sits on a much sturdier throne than the previous one.
Conagra Brands, maker of grocery store staples such as Marie Callender's, Reddi-wip, and Slim Jim, yields 7.6%. That is currently the highest payout ratio in the S&P 500 after chemicals company LyondellBasell Industries slashed its dividend in half last week.
The title of highest-yielding company in the S&P 500 is at best a mixed blessing. It means plenty of attention from income-hungry dividend investors frustrated with the index's historically low 1.2% payout. But it also means constant speculation about whether such a market-beating yield is sustainable in the long run.
The verdict on Conagra? The company certainly has its challenges, but they are a lot less urgent than the major cash crunch LyondellBasell was forced to head off. And Conagra has a plausible shot of growing out of its problems.
Shares of Conagra are up about 8.6% in 2026, a beneficiary of the market's broad rotation into staples and other real-economy stocks. But the company has struggled for years as inflation-weary consumers pass over its dependable brands in favor of cheaper generic options.
Wall Street analysts are expecting a sales decline of 3.1% for the fiscal year ending in May and a 1% decline in the following year. Still, there are bright spots. Conagra, which gets about 40% of its sales from the freezer aisle, has identified high-protein frozen foods such as edamame and its Marie Callender's Chicken Parmigiana Bowl as growth areas.
It has also argued that it could turn belt-tightening to its advantage by offering frozen versions of eat-out favorites such as P.F. Chang's Korean BBQ-Style Chicken -- which are far cheaper than ordering similar dishes from the restaurant.
There is no doubt Conagra's dividend, which it has paid every quarter since 1976, is being squeezed. Conagra's "dividend payout ratio is elevated at 80% in FY 26 vs. 50% to 55% historical target," wrote CFRA's Arun Sundaram in a note last week.
"Cost inflation remains elevated from protein, cocoa, eggs, and tariffs. While productivity savings provide offset, margins remain compressed," added Sundaram, who rates Conagra a Hold with a $19 price target, more or less in line with the current price of $18.80.
Still, while an 80% dividend payout ratio is above the S&P 500's average of around 60%, it is below the 90% level that often starts setting off alarm bells for investors.
On Conagra's most recent conference call Chief Financial Officer David Marberger said the firm was balancing several priorities -- including the dividend, investing for growth, and paying down debt. But he also argued current cash flow trends should allow it to comfortably do all three.
"We're continuing to allocate attractive returns to our shareholders with our dividend," he said.
Write to Ian Salisbury at ian.salisbury@barrons.com
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(END) Dow Jones Newswires
February 27, 2026 21:31 ET (02:31 GMT)
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