If you are a dividend investor looking to live off of the passive income that your portfolio generates, you will want to look at Coca-Cola (KO 1.22%), PepsiCo (PEP 0.93%), and Realty Income (O 1.38%) today. If you own them, you might even want to double up on the investment. Here's why each of these reliable dividend stocks should be on your short list right now.
1. Coca-Cola is fairly priced
It is hard to get too excited by an investment when the price is described as fair. But Coca-Cola isn't any old company, it is one of the largest consumer staples companies on the planet.
Image source: Getty Images.
Its namesake brand is recognized the world over and it has a host of additional brands with huge market presence. The company's distribution, marketing, and innovation skills are as good as, if not better than, any of its competitors. This is a great company, which is highlighted by the fact that it has achieved Dividend King status with over six decades' worth of annual dividend increases behind it.
Which is why a fair price is so exciting. Great companies don't usually go on sale very often. But right now Coca-Cola's price-to-sales and price-to-earnings ratios are below their five-year averages even though it is performing relatively well as a business.
NYSE: KO
Key Data Points
The roughly 3% dividend yield, meanwhile, isn't overly high for Coca-Cola but it is well above the 1.2% yield of the S&P 500 index and the 2.7% yield of the average consumer staples stock.
The stock isn't a screaming value opportunity, but a fair price for a great business is good investment opportunity that conservative investors won't want to miss.
2. PepsiCo is historically cheap
If a fair price for a great company isn't good enough for you, how about a cheap price for a great company? That's what you'll find right now with Coca-Cola competitor PepsiCo.
That said, PepsiCo's business includes beverages, snacks, and packaged foods, so it is a more diverse business. PepsiCo is cheap right now and Coca-Cola is only fairly priced because PepsiCo isn't hitting on all cylinders. That happens even with well-run companies. Note that that PepsiCo is also one of the world's largest consumer staples companies and it is a Dividend King, too.
NASDAQ: PEP
Key Data Points
The real attraction here, however, will be the roughly 4% dividend yield. That's a 33% income jump from Coca-Cola, assuming you don't mind holding a stock that is deeply out of favor at the moment. Indeed, the yield here is near the highest levels in PepsiCo's history. The P/S ratio is below the five-year average, as well. (The P/E ratio is a bit above the five-year average, but that is because of currently weak earnings.)
If you can handle a bit of near-term uncertainty, history suggests that PepsiCo's high yield is a chance to grab a good value while the company muddles through a rough patch.
3. Realty Income just keeps getting better
Realty Income is the largest net lease real estate investment trust (REIT). It is a bellwether in the net lease space and has increased its dividend annually for three decades. Frankly, as a business, Realty Income is kind of boring. What's exciting is the 5.7% dividend yield. This is a slow and steady industry giant that is built from the ground up to keep paying you each and every month (the monthly dividend frequency is a nice bonus if you are retired).
The problem with Realty Income is that it is a slow-growing business, largely thanks to its vast size. However, it is important to note that the REIT is working hard to set the foundation for future growth. Roughly 80% of its rents come from retail properties, which are fairly easy to buy, sell, and release as needed.
NYSE: O
Key Data Points
The rest comes from an interesting mix of properties and businesses. Industrial, casino, and data center assets are important right now. So, too, is the company's growing reach in Europe, where the net lease approach is still rather new. On top of that, Realty Income has started making loans and it has created an asset management business for institutional investors.
The takeaway for dividend lovers is that boring Realty Income is building the foundation on which it can continue its slow and steady growth. And that could make it a valuable high-yield foundation for your dividend portfolio, too.
Don't miss the opportunity to add some dividend stocks
The market is near all-time highs, but that's the market. When you look under the covers, the S&P 500 index isn't the whole story. Coca-Cola, PepsiCo, and Realty Income show that a little digging can unearth attractive dividend stories that are worth buying, and perhaps buying more of, right now.
