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Realty Income’s monthly dividend looks attractive as the company begins to benefit from upcoming interest rate cuts.
Target’s missteps have not put its generous dividend at risk.
PepsiCo offers high dividend returns at a valuation that is likely lower than it appears.
10 stocks we like better than Realty Income ›
One enduring strength among the more prominent consumer stocks is their dividends. Many have maintained dividend payments for decades and, in many cases, they raise their dividends on an annual basis.
Some of these stocks also happen to offer dividend yields that are significantly above the S&P 500 average of 1.2%. Admittedly, such yields often come with depressed stock prices. Still, as business conditions improve, investors could benefit from high dividend returns and, possibly, stock price recoveries in these three stocks.
Investors know Realty Income (NYSE: O), which bills itself as the “monthly dividend company,” for living up to that moniker. Not only has the real estate investment trust (REIT) maintained this trend since 1994, but it has also hiked its payout at least one time per year since then. At almost $3.23 per share annually, its current yield is about 5.4%.
It has funded those dividends by owning single-tenant, net-leased properties. This provides the company with a steady income as tenants cover the costs of maintenance, insurance, and property taxes. Currently, it has leased nearly 99% of the approximately 15,600 properties it owns.
Despite that success, interest rates rose early in the decade, leading to the stock selling at more than 25% below its all-time high. High rates have not slowed its profitability, as it earned $4.11 per share in funds from operations (FFO) income, a measure of a REIT’s free cash flow. This means the stock trades at just 14 times its trailing FFO income.
Additionally, amid an economic slowdown, the Fed is finally poised to cut interest rates. This should allow the company to refinance existing debt and fund new property developments at a lower cost, possibly serving as the catalyst its stock needs to finally recover.
Target (NYSE: TGT) has steadily trended downward since peaking in late 2021. It has lost nearly two-thirds of its value during that time as an uncertain economy, supply chain woes, and a series of controversial political stances led to fewer shoppers.
Moreover, the recent appointment of COO Michael Fiddelke as its next CEO drew a negative reaction from investors.
Despite a falling stock price, Target continued a pattern of annual payout hikes. With the streak now at 54 years, it is a Dividend King, a status that companies tend not to abandon unless necessary. That payout, which now amounts to $4.56 per share annually, yields more than 4.8%.
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