In general, there's a risk/reward trade-off that investors have to make on Wall Street. The risk piece of that can be a problem for more conservative types, but don't let that stop you from investing -- there are plenty of desirable companies out there that offer juicy returns, often via a combination of dividend income and slow and steady business growth. Three you might want to consider today are Realty Income (NYSE:O), Consolidated Edison (NYSE:ED), and Coca-Cola (NYSE:KO).
1. Like replacing a paycheck
Landlord Realty Income offers investors a generous 4% yield, which is more than twice the 1.4% yield on offer from the S&P 500 Index. Moreover, this real estate investment trust (REIT) has increased its dividend every single year for 25 consecutive years, making it a Dividend Aristocrat. And the dividend is paid monthly, so you will see your cash 12 times a year as opposed to the more usual four times for most companies, which makes budgeting a lot easier if you are living off your dividends.
Realty Income uses a net-lease approach, which means that its tenants are responsible for most of the costs of the properties they occupy. That's a fairly low-risk approach in the real estate space. And with a portfolio of around 6,600 properties, no single asset has that big an impact on the overall portfolio. While 84% of rents come from the retail sector, the REIT is heavily focused on service, "low cost" stores, and non-discretionary businesses that are insulated to some degree from internet competition and normally find ample demand regardless of the economic environment. Now add in long lease terms (the average remaining lease length is 9 years) and an investment-grade balance sheet, and you have a very safe business.
Realty Income is rarely cheap, but its dividend yield today is about the middle of its range over the past decade. That suggests that it is probably fairly priced right now, which is a decent opportunity for long-term and low-risk investors.
2. Don't fall asleep
If you like boring, how about an electric utility like Consolidated Edison. It has increased its dividend every single year for an incredible 47 years, which is just three shy of Dividend King status. And while the rate of dividend growth has hovered around the long-term growth rate of inflation, that means the utility has basically maintained or slightly grown the buying power of its dividend over time. The yield is currently around 4% today, which, like Realty Income's, is about the middle of the yield range over the past decade.
What's most interesting about Consolidated Edison is that the regulated utility has largely shifted away from selling electricity and natural gas. Now it basically gets paid for the transmission of these things over its wires and through its pipes, so it is well prepared for the changes taking shape in the utility sector (notably the transition to clean energy). And it's important to note that Con Ed's home market is the New York City region, which is a historically vibrant global business hub. Although the company will probably never excite you, if history is any guide, it will provide a solid foundation for your portfolio, and pay you a growing income stream along the way. Not a bad choice if you like safe, boring stocks.
3. Short-term headwinds
The last name up is Coca-Cola, which currently offers a 3.1% yield. That's toward the high end of the company's historical range. Although most people know Coca-Cola for selling soda, it really does a lot more than that, with beverages that span across a broad spectrum of the industry -- and planet. For example, it also sells orange juice, coffee, water, tea, sports drinks, and energy drinks. It has leading brands in each of the categories it serves, with around two-thirds of its revenue coming from outside of North America. The stock price has been weak lately because of the headwinds from the coronavirus, which has hurt sales to restaurants and other away-from-home locations, but as that health issue passes Coca-Cola's business should pick up again.
Meanwhile, even with the current headwinds, Coca-Cola hasn't broken its streak of annual dividend increases. The hikes in 2020 and 2021 have extended the company's dividend track record to an incredible 59 years. That's solidly in the Dividend King range. While recent increases have been modest -- which is not shocking given the business backdrop -- the annualized increase over the past decade was a strong 6% or so, which is around twice the historical rate of inflation growth. With great beverage brands spread across the globe, Coca-Cola is a good option for investors that prefer the tortoise over the hare.
A lot of investors want to get rich quick, which can lead to taking big risks that can sometimes lead to disastrous outcomes. That's why the slow and steady approach is often a better one.
If that resonates with you, then Realty Income, Consolidated Edison, and Coca-Cola are all names you should take a look at today. Realty Income and Consolidated Edison look fairly priced given where their yields are, so you aren't getting a bargain. But paying full fare for good stocks isn't a bad choice. Coca-Cola, meanwhile, appears like it could be relatively cheap today, historically speaking, which might interest conservative types that also lean toward a value focus.