When you're just starting to invest, it's easier to begin with small sums and build slowly as your experience grows. Plenty of excellent stocks trade for under $100. Of course, you might be able to buy fractional shares of certain high-priced stocks, but not all brokers provide that service. You don't have to invest in high-risk penny stocks, either.
Two stocks in just right sweet spot to consider now are Coca-Cola (KO), which traces its founding back to the late 1800s, and Realty Income (O -0.17%), which was started more than 50 years ago. More than venerable companies, they have put themselves in positions for continued success, making them worthy of becoming part of your long-term holdings. Let's see why.
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1. Coca-Cola
Coca-Cola (KO) has well-known and immensely popular beverages. It sells five out of the world's six best-selling soda brands. But the company doesn't merely rely on soda, which is subject to changing tastes and health trends. Coca-Cola also distributes other products, such as water, coffee, tea, and dairy- and plant-based beverages.
The company continues to expand its market share. Coca-Cola's adjusted sales, which removes foreign currency translation effects and acquisitions/divestitures, increased by 11% in the latest quarter, ended in September 2023. While higher prices and a changing mix accounted for 10 percentage points, increased volume was responsible for the balance.
A mature company, Coca-Cola may not experience breakneck revenue increases. But higher revenue has led to increased profitability, with adjusted operating income growing by 15%, supporting dividends. Coca-Cola has also increased its dividend for 61 straight years, making the stock a Dividend King.
Coca-Cola's free cash flow of $7.9 billion was more than ample to pay the $4.1 billion of dividends. The stock has a 3.1% dividend yield, about double the S&P 500's 1.5%.
2. Realty Income
As a real estate investment trust (REIT), Realty Income must pay out at least 90% of its taxable income as dividends. For income-seeking investors, this provides a good structure for regular payouts.
The company currently gets about 83% of its rental payments from the retail sector. While that may unnerve some investors given the growing popularity of online shopping, management has done a nice job mitigating that risk.
The company seeks out tenants with minimal threats from e-commerce, such as grocery, dollar, and home improvement stores, and its occupancy levels have been around 99%. It also received a 6.9% increase on expiring leases in the third quarter.
Management has announced that it will acquire Spirit Realty Capital, which has properties like distribution centers, data centers, and industrial storage in addition to retail space, for $9.3 billion. The deal will diversify Realty Income's real estate portfolio.
Realty Income pays a monthly dividend, and has raised it consistently over time. In December, the board of directors hiked the payment from $0.256 to $0.2565, marking 105 straight quarterly increases. Management expects its adjusted funds from operations, a measure of cash available for distribution, to come in at about $4 per share compared to $3.08 at the new annual dividend rate. The stock sports a 5.4% dividend yield.
If you're looking for dividend stocks that you can buy for under $100, Coca-Cola and Realty Income top the list. Both have shown the willingness and ability to raise payments regularly. That should provide comfort during even the most trying times.
