In a market filled with volatility that seems less and less reliant on fundamentals with each passing day, risk-adverse investors may be better off looking for stocks that generate reliable streams of passive income.
Dividend stocks are not risk-free, of course. However, as long as investors can gain confidence in a company's ability to cover and pay its dividends, they can be on their way to consistently accumulating wealth in a more predictable manner, which may be preferable if market conditions take a turn for the worse. Here are three top dividend stocks to buy in August.
1. Realty Income: As consistent as they come
The self-proclaimed Monthly Dividend Company, Realty Income (O -0.90%) is a real estate investment trust (REIT). These are companies known for paying strong dividends. REITs can avoid paying corporate taxes if they pay out over 90% of their taxable income to shareholders through dividends and follow other conditions like earning at least 75% of their income from qualifying real estate activities.
Their dividends can fluctuate along with their earnings, but Realty Income is as solid as they come. The company has a strong 5.6% yield and has made consecutive monthly dividend payments for three decades. It has also been able to raise its annual payout at a 4.3% compound annual growth rate.
As a triple net lease operator, its tenants are responsible for property taxes, property maintenance, and insurance costs. These tenants may be able to negotiate lower lease rates and have more flexibility over their spaces, which can be particularly helpful for businesses. Realty Income focuses on companies in non-discretionary sectors, with low price points, and service-focused tenants.
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In 2024, it generated adjusted funds from operations (AFFO), which is kind of like free cash flow for a REIT, of $4.19 per share, while paying annual dividends of about $3.13 per share, which shows the company can sustainably cover its current dividend and continue to raise it in the future.
2. Pfizer: Committed to the dividend
You have likely heard of huge pharmaceutical company Pfizer (PFE -2.38%) thanks to the role it played in creating vaccines during the earlier days of the COVID pandemic. But since the highs it made in late 2021, the stock has struggled and is actually down about 34% over the last five years as of July 29. As the pandemic has eased, sales of vaccines have declined, and investors have wondered what's next for the company.
In 2023, it acquired Seagen in a roughly $43 billion deal to boost its drug pipeline, specifically related to cancer drugs. Pfizer hopes the acquisition can add about $10 billion of revenue by 2030. In its first-quarter earnings presentation, the company also laid out a path to $7.2 billion of cost savings by the end of 2027.
After cutting its dividend in half in 2009, Pfizer has paid and increased its quarterly payout every year since and now has a 7.1% dividend yield. That's high, but the company has a trailing-12-month free cash flow yield of 8.14%.
On the first-quarter earnings call, management did face questions about its ability to maintain and grow the dividend, particularly with some of its patents set to expire in the coming years, uncertainty over tariff rates, and whether or not President Donald Trump will impose tariffs on pharmaceutical companies.
But Chief Financial Officer David Denton said multiple times that the dividend is a very important part of Pfizer's capital allocation plan, and that the company plans to maintain it and grow it over time, with a "steadfast" commitment.
3. Sirius XM: Generating significant free cash flow
Digital audio company Sirius XM Holdings (SIRI -1.04%) is another turnaround story. The stock has struggled immensely over the last five years and is down about 60% over that time. However, management has embarked on a revival plan, and investors will be compensated with a nearly 4.7% yield while they wait.
As the owner of Sirius satellite radio and music streaming service Pandora, it has been met with significant competition over the years by companies like Spotify and has seen subscribers decline as a result. Last September, the company laid out a long-term plan to add 10 million subscribers, bringing its total to roughly 50 million, and grow free cash flow by 50% to $1.8 billion.
Management plans to do this by streamlining its technology and pricing plans, growing its ad business, and acquiring the advertising and distribution rights of big-name podcasts. Sirius looked to have some momentum in the back half of 2024, with Sirius XM self-paying subscribers growing, but then the company saw a net loss of over 300,000 subscribers in the first quarter of 2025.
Still, it is quite attractive as a dividend company. It is guiding for $1.15 billion of free cash flow this year and currently is only projected to pay annual dividends of $364 million based on its first-quarter figure, leaving a healthy margin of safety.
