Many investors look for stocks that pay dividends, which offer a steady source of income. Some companies issue generous dividends with yields that rival or even outdo traditional safety investments like bonds. PepsiCo's dividend yields 2.8% at Thursday's close, higher than the S&P 500 average of 1.6%. But there are other great companies that offer a higher yield. Coca-Cola (KO -0.61%), JPMorgan Chase (JPM 0.05%), and Realty Income (O -0.34%) all pay you more.
Coca-Cola's dividend is the real thing
PepsiCo is working on edging past its longtime rival Coca-Cola. It's been growing revenue faster for several years, and its wider range of products has helped it perform better during the pandemic. Third-quarter revenue came in at $4 billion, growing 5%, versus Coca-Cola's still-dominant $8 billion, but with a 9% decline.
Historically, there have been times when PepsiCo gave the higher yield -- but Coke's has outdone it for many years, yielding 3.1% at Thursday's prices.
Coca-Cola is restructuring in an effort to regain its momentum. It had a great 2019, closing out the year with a 16% sales increase in the fourth quarter, before the pandemic hit. Revenue dropped 28% in the second quarter, at the worst part of lockdowns. Its takeaway business, which generally accounts for about half of the total, was severely impacted by COVID-19. The company took immediate action, building out nine new operating units, replacing the previous 17, to streamline and unify production. It also announced that it would cut underperforming products from its over 5,000 to improve company focus, and it also said that it will cut thousands of jobs under the new structure.
Despite its sales drop and debt issues, Coke did not suspend dividend payments like other pandemic losers. CFO John Murphy said: "We recognize the dividend is important to our investor base and continue to believe our long-term model can deliver the cash necessary to reinvest to grow the business while also supporting the dividend."
Coke is still the top beverage company, and it has shown its stability and commitment to its dividend over time.
Keeping its dividend even in the worst of times
Banking is a heavily regulated industry, and banking stocks have been on the losing side of COVID-19 as the Federal Reserve lowered interest rates and banks put aside hefty amounts in loan reserves to cover potential defaults.
In June, after the annual stress test, which assesses how well banks can handle an economic crisis, the Fed banned share repurchase programs and capped dividend payouts for banks in the third quarter due to fears about economic recovery. After a new round of stress tests earlier this month, the Fed ended the ban on share repurchase programs -- and JPMorgan Chase immediately announced a $30 billion share repurchase program. JPMorgan also announced that it's maintaining its $0.90 dividend, which gives it a 2.9% yield at Thursday's prices.
JPMorgan's stock is down almost 11% this year, which is better than similar banks. So while investors might be wary of bank stocks for dividend payments because of the danger that they might be cut during difficult times, JPMorgan is holding steady during a challenging period. As CEO Jamie Dimon said in announcing the share repurchase plan: "Our highest and best use of capital continues to be supporting our clients and driving an inclusive economic recovery. We will continue to maintain a fortress balance sheet that allows us to safely deploy capital by investing in and growing our businesses, supporting consumers and businesses, paying a sustainable dividend, and returning any remaining excess capital to shareholders."
How about 12 annual dividends?
Realty Income dubs itself "The Monthly Dividend Company" because it cuts a dividend for shareholders every month -- and a good one, with a yield of 4.6%. It's paid a dividend for 605 consecutive months and increased it for 93 consecutive quarters.
Realty Income is a real estate investment trust (REIT), which is a category of companies that hold income-producing real estate portfolios. REITs are required to pay out 90% of their income as dividends, making REITs a strong choice for income-seeking investors.
REITs generally hold portfolios in specific industries, and Realty Income is a retail REIT, which means it leases space to retailers. Its top tenants include recession-resistant businesses such as Walgreens, 7-Eleven, and Dollar General. And while its list of top tenants also includes some theater and fitness chains, which have been hurt by the pandemic, it collected 93% of contractual rent in the third quarter, which ended Sept. 30. Portfolio occupancy has never been below 96%, and it ended the third quarter with a strong 98.6%. The company invested almost $700 million in new properties in the third quarter.
Although Realty Income's stock price is down this year, shareholders are still enjoying high dividends.