As the market pulls back in fits and starts, a normal pattern in a bear market, investors should have a wish list of companies that they want to buy at lower prices. Three good dividend names to include on that list today are real estate investment trust (REIT) giant Realty Income (O -0.71%), integrated energy powerhouse TotalEnergies (TTE -0.44%), and U.S. utility Dominion Energy (D -2.02%). Here's a quick look at why each is worth looking at right now.
1. Big, reliable, and high yielding
REIT Realty Income owns net-lease properties, which means the occupants of its single-tenant buildings are responsible for most of the operating costs of the assets they occupy. Although the risk is high at any individual property given that there is only one tenant, when spread across a large enough portfolio the risk is very low. Realty Income has a massive portfolio of over 11,000 properties.
Most of its tenants hail from the retail sector (about 80% of rents), but it also has exposure to industrial and "other" (vineyards, for example) properties (the remainder of the rent roll). Also, about 10% of its revenue comes from Europe, providing some geographic diversification. The REIT is easily one of the largest names in the net lease niche.
Although the stock is pulling back along with the market, there's little reason to expect Realty Income's successful track record to come to an end. It has an investment-grade-rated balance sheet that helps provide easy access to debt capital. Its shares often trade at a premium to those of its net-lease peers, which also helps keep capital costs in check. And it has built a 27-year history of annual dividend increases. That span includes hikes through several recessions and bear markets, suggesting management knows how to navigate tough times. The yield is 5.3%, which is attractive for this industry-leading trust.
2. Changing with the times
TotalEnergies is one of the world's largest integrated energy companies with a huge oil and natural gas portfolio. Despite the recent pullback, the company has been raking in big profits with oil prices relatively high. As a testament to that, it recently announced a one-euro special dividend on top of its regular dividend in 2022. Basically, it is looking to share the wealth with investors. But here's the thing: The cash rolling in today is being used in other ways, too.
For example, TotalEnergies is working to shift its carbon fuel focus from oil toward natural gas, a fuel that's expected to help support the transition toward cleaner alternatives. And the company is also aggressively growing its clean energy footprint, earmarking a third of its capital spending budget to the space. In other words, this energy giant is changing along with the world around it. Meanwhile, shareholders can collect a fat 5.2% dividend yield along the way. Investors have to pay French taxes on that, but it is the highest yield among the company's closest peers. If you are looking for an energy stock, this one should be high on the list.
3. Opportunity knocks
Dominion Energy is one of the largest utilities in the United States, serving 7 million electric and natural gas customers across 15 states. The dividend yield is up over 4.1%. That said, the company cut the dividend in 2020. However, that was because it sold a large midstream pipeline business, not because of the impact of the coronavirus pandemic. And since the cut, it has embarked on an investment program that it expects to lead to a long string of dividend increases. At this point, management is calling for 6% annual dividend growth through at least 2026.
Dominion just received some negative news on a large offshore wind project. This project is pretty important to the company's ability to grow its dividend. This likely has some investors worried that the projected dividend growth won't materialize, which isn't an unreasonable concern. However, there's still time for Dominion to work with regulators to resolve this snag, which, given the importance of the project to the company and the state of Virginia, seems like a likely outcome. If you can handle some near-term uncertainty, this utility is looking attractive right now.
Time for some deep dives
Realty Income, TotalEnergies, and Dominion Energy are very different companies, but they are all industry leaders with generous yields. Realty Income is probably a good option for conservative investors. TotalEnergies is a solid choice for those looking at the energy patch. And Dominion is a name that contrarian types might find attractive given the current uncertainty around its offshore wind investment plans. But if you can think long-term, all three are names worth examining as the market pulls back.
