Should You Buy the 3 Highest-Paying Dividend Stocks in the Nasdaq?

Key Points

• The Nasdaq's highest-yielding stocks pay dividends in the range of roughly 4% to 6%.

• The key to evaluating dividend stocks is looking at a company's track record and ability to cover and increase its dividend.

• This also involves looking at a company's free cash flow.

• 10 stocks we like better than PepsiCo ›

Many investors view the Nasdaq Composite (NASDAQINDEX: ^IXIC) index as the home of higher-growth stocks, typically in the tech or artificial intelligence (AI) sectors. But with thousands of stocks trading on the exchange, there's certainly something for everyone, including stocks in more conservative sectors like consumer staples or stocks that are considered value plays.

There are even strong-paying dividend stocks available to investors who prefer to look for passive income opportunities, rather than relying strictly on price appreciation. If you are looking for Nasdaq-based dividend stocks to buy, should you consider the three highest-yielding stocks in this index?

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1. Kraft Heinz -- 5.8% yield

Most people have heard of the condiments and food manufacturing giant Kraft Heinz (NASDAQ: KHC). The company's many products, including Heinz Ketchup and Kraft Mac & Cheese, are a staple in fridges and pantries around the world. Many investors are familiar with Kraft Heinz because it's a longtime holding in Berkshire Hathaway's portfolio, run by Warren Buffett.

But ever since Kraft and Heinz merged in 2015, the stock has been an investment disaster. The company has been managing some high debt and working to turn around declining consumer interest, as people opt for healthier, more natural products instead of processed foods. Earlier this year, the company announced that it's exploring strategic alternatives, including potentially spinning off its grocery business in order to focus on the faster-growing condiments business.

The team at Berkshire seems to have had enough. Berkshire's representatives on Kraft Heinz's board of directors have left the board, and there are several indicators suggesting that Berkshire may soon begin to sell its position.

Kraft Heinz executed a significant dividend cut in 2019, but the dividend yield remains high, and the company hasn't increased its dividend since the cut. The company's trailing 12-month free cash flow of $3.5 billion seems more than healthy enough to cover the current annual dividend payout of $1.9 billion. The company likely needs to continue paying a dividend in order to maintain shareholder interest.

That said, Kraft Heinz has struggled to make progress for a long time. I'm not entirely sold on the spin-off plan, because it's unclear how management plans to handle its overall debt in that scenario. So I still have questions about the company right now, and I'm wary of buying the stock. However, the dividend looks safe and currently yields an appealing 5.8%.

2. Comcast -- 4.15%

The large internet and cable provider Comcast (NASDAQ: CMCSA) has also been operating in a tough industry. The company faces competition when it comes to providing internet access, while the cable business has struggled due to all of the streaming options that have led people to "cut the cord." These issues are contributing to Comcast's stock being down about 15% in 2025 and 19% over the past year.

In the second quarter of the year, despite Comcast turning in better-than-expected results for earnings and revenue, the company lost another 226,000 broadband customers. Comcast CFO Jason Armstrong said that "the competitive environment remains intense, as we had previewed," although Armstrong added that he has been encouraged by some of Comcast's new initiatives.

The good news is that Comcast has paid and increased its dividend every year since 2008. Furthermore, Comcast has a trailing 12-month free cash flow of $16.6 billion to cover $4.94 billion in dividend payouts and a trailing 12-month payout ratio of only 21%. Many questions remain about the company's core business, so I wouldn't buy the stock for appreciation purposes until there is an inflection point in subscribers. However, investors looking for a reliable, juicy dividend can buy Comcast.

3. PepsiCo -- 3.92%

Another consumer staples brand, the iconic beverage and snack food maker PepsiCo (NASDAQ: PEP) has struggled for some of the same reasons Kraft Heinz has: People are looking for healthier options. PepsiCo is also in a competitive market, which doesn't make things any easier, and the company hasn't seen enough growth to excite investors.

Management does have a plan to rejuvenate the business, however. The company is removing artificial coloring from many of its products, relaunching some of its major chip brands like Lay's and Tostitos, and altering some of its products with protein, fiber, and whole grains to offer more nutritional value. PepsiCo is also looking to scale its alternative snack selections, which include brands like Sabra and Simply, which seem to be resonating better with consumer preferences these days.

PepsiCo is also a Dividend King, meaning it is part of an exclusive group of companies that have paid and increased their dividends for at least 50 consecutive years. Management seems laser-focused on keeping this trend going. Earlier this year, PepsiCo CFO Jamie Caulfield said, "We view the dividend as a really important component of our overall total shareholder return equation." He also noted that the company has grown the dividend at a 7.5% compound annual rate over the last 15 years.

However, over the last 12 months, PepsiCo's free cash flow has been somewhat depressed and its payout ratio elevated. Following its most recent quarter, the ratio was nearly 100%, suggesting that the dividend might be in trouble. The jump in ratio is partly explained by PepsiCo's recent purchase of beverage company Poppi, which temporarily unbalanced its finances and elevated its payout ratio above its 5-year average of around 75%. Expect the ratio to improve in future quarters as finances get realigned and the acquisition is fully amortized.

Given management's comments and the company's track record, a dividend cut still seems unlikely. However, I'd still prefer to put my money elsewhere until PepsiCo can stabilize its business as well as free cash flow. If you trust that PepsiCo will eventually stabilize things, the dividend yield of 3.92% is appealing.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Comcast, Kraft Heinz, and Nasdaq. The Motley Fool has a disclosure policy.