Buying stocks is especially fun when you're a dividend investor. Every share means more annual dividend income for your portfolio.
Any time you can buy a dividend stock for less than you believe it's worth, that's a smart buy. It's subjective, but there are several dividend stocks in the market right now, sitting at compelling prices that make sense for long-term investors.
Here are three examples. Even if you don't have $5,700 to spend, it's not a big deal since most brokerage accounts allow you to purchase fractional shares these days.
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1. A top-notch REIT weighed down by high interest rates
Realty Income (O +0.21%) is one of the best real estate investment trusts (REITs) that you'll come across. The company invests in and leases commercial real estate. Since REITs must pay out at least 90% of their taxable income to shareholders as dividends, they are naturally excellent dividend stocks. Realty Income yields a juicy 5.75% at its current share price, and pays a monthly dividend, something not many companies do.
But what makes Realty Income such a good business? Look to its rock-solid fundamentals, including a diverse real estate portfolio, net lease model, and investment-grade balance sheet. The company has managed to raise its dividend for more than 30 consecutive years, despite enduring some of the worst hardships the real estate market has faced, including the COVID-19 pandemic and the 2007-2009 financial crisis.
NYSE: O
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However, the stock is down 29% from its all-time high. Realty Income often uses debt to acquire new properties and grow. Interest rates have continued to rise, which can raise borrowing costs, slow growth, and, consequently, weigh on Realty Income's share price. Trading at just 14 times its funds from operations, Realty Income is a bargain that will likely continue to pay you increasingly more over time.
2. This Dividend King offers a combination of income and steady growth
Hormel Foods (HRL 1.49%) offers consistency that few companies can. The Dividend King has increased its payout for 59 consecutive years and has paid dividends for nearly a century without fail. Most known for its Spam brand of canned meat, Hormel owns a portfolio of food and snack brands, including Spam, Jennie-O, Dinty Moore, Applegate, Planters, and Skippy. The stock's 3.8% dividend yield establishes a solid floor for annual investment returns.
Plus, you don't grow for generations by accident; the company has demonstrated its ability to adapt to changing consumer tastes and needs over the years. It has launched and acquired brands to shift its portfolio into growing categories, such as healthy and high-protein offerings, as well as snacks. Management aims to grow Hormel's net sales by an average of 2% to 3% annually and operating profits by 5% to 7% annually over the long term.
NYSE: HRL
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Investors can feel good about the dividend's safety. The payout ratio is manageable at 72% of 2025 earnings estimates, backed by an investment-grade balance sheet. The stock currently trades at 19 times estimated 2025 earnings, a reasonable valuation for a stock with Hormel's combination of dividend yield and resilient mid-single-digit earnings growth.
3. This emerging dividend growth star is a buy despite trading at all-time highs
Booking Holdings (BKNG 3.17%) is the budget buster on this list with a recent share price around $5,600. But remember, many brokerages allow you to buy fractional shares, so don't pass on this emerging dividend rockstar because of its share price.
The company has become a global technology leader in the hospitality and travel industries, with its five primary brands: Booking.com, Priceline, agoda, Kayak, and OpenTable.
The stock only began paying a dividend last year, so it may not be on the radar for most dividend investors. That could soon change. Booking Holdings comes packed with dividend growth potential. Its payout ratio is just 18% of the company's 2025 earnings estimates, and analysts expect earnings to grow by an average of 15% annually over the next three to five years. The dividend could grow by leaps and bounds for quite a while.
NASDAQ: BKNG
Key Data Points
Despite trading near its all-time highs, Booking Holdings offers value at its price. The stock trades at 26 times its 2025 earnings estimates, an attractive valuation given the anticipated mid-teens earnings growth and numerous years of dividend increases ahead. Investors who buy now should see their yield on cost skyrocket from its current 0.7% starting point. Booking Holdings' one-two punch of dividends and capital gains upside makes it a brilliant buy right now.
