Do you have some idle cash you're looking to put to work for a while? Growth stocks may still be the market's most enticing prospects.
But with many of the major growth names being overbought as well as overvalued, this could be a smart time to start shifting your portfolio more toward value stocks -- and dividend stocks in particular.
Here are three of the best bets to consider adding sooner than later.
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McDonald's
McDonald's (MCD +0.24%) is the world's biggest restaurant chain as measured by revenue and second-biggest in terms of total locations (China's Mixue operates more stores than McDonald's 44,599). Either way, the golden arches are the planet's most universally recognized restaurant logo. This dominance has played a big role in the stock's sizable returns for shareholders.
Except this company isn't quite what you might think it is. It's not a hamburger chain; rather, it's a rental real estate operator built around the hamburger business.
NYSE: MCD
Key Data Points
Of the chain's 44,599 stores, only a little more than 2,000 are owned and operated by the company itself. Most of other 42,500 or so are franchised, yet the buildings and land where these stores operate are still owned by the parent corporation, which charges these franchisees ever-rising market-based rent.
It's an unusual arrangement within the realm of fast-food restaurants; most franchisees also own the building they're using to operate their business. When you're as marketable as McDonald's is, though, its franchisees are willing to sacrifice a core component of building their own business.
This business model is ideally suited for supporting ongoing dividend payments. That's how McDonald's has managed to raise its annual dividend payout for 49 consecutive years despite suffering the occasional headwind during that stretch.
And there's no end in sight for this streak. Newcomers would be stepping in while the stock's projected dividend yield is 2.5%. That's not huge, but the underlying payout has grown by more than 40% over the past five years and nearly doubled during the past decade.
Johnson & Johnson
There's a reason Johnson & Johnson (JNJ +0.77%) shares soared more than 40% last year, reversing a multiyear soft patch. And it's not just the 2023 spinoff of its consumer-facing products business into a separate company called Kenvue, or the settlements of class-action lawsuits linked to its asbestos-tainted talcum powder.
Rather, J&J shares are up mostly because enough investors recognize that the pharmaceutical company's long developmental dry spell is finally coming to a close. It's in a five-year stretch where 10 or more new drugs -- each capable of generating more than $5 billion in new annual revenue -- could be introduced.
And in the near term, 15 more new drugs expected to produce yearly sales of at least $1 billion each are in the works. These include psoriasis-fighting Icotrokinra and the recently approved Inlexzo to treat bladder cancer.
Meanwhile, already-approved therapies like Tremfya, for chronic inflammation, continue to expand on their permitted uses. Tremfya's sales were up more than 40% year over year in the third quarter of last year, while revenue for oncology drug Darvalex improved 20%.
NYSE: JNJ
Key Data Points
So Johnson & Johnson is moving forward in a way it hasn't been able to in a while. More important to income-minded investors, this positions J&J to maintain its 63-year run of annual dividend increases. You can plug into this growth streak while the stock's forward-looking dividend yield stands at a respectable 2.5%.
Digital Realty Trust
Lastly, add Digital Realty Trust (DLR +0.65%) to your list of smart dividend stocks to buy with $3,000 right now, while its yield is a healthy 3.1%.
This real estate investment trust (REIT) is not a household name. but there's a pretty good chance someone in your household regularly benefits from the service it provides. Digital Realty Trust owns and operates more than 300 data centers, partnering with players like Microsoft, Amazon, and IBM to serve more than 5,000 customers.
And the rise of artificial intelligence has been a boon for this REIT. Its third-quarter revenue rose 10% year over year to $1.6 billion, pushing per-share profits up from $0.09 to $0.15. Analysts expect the growth of the top and bottom lines to accelerate for at least the next few years, too, extending the company's 20-year streak of revenue growth.
NYSE: DLR
Key Data Points
That's not the main reason for owning this particular dividend stock, however. Far more important to income investors is how this company is structured as a REIT and the efficiency it creates in terms of passing along profits to shareholders. As a real estate investment trust, the majority of its earnings are paid out as dividends and are not first taxed at the corporate level. This ultimately means more of its profits are dished out to shareholders.
That long-standing track record of annual dividend growth finally ended in 2023, largely to improve its balance sheet at a time when competitive pressures were ramping up. But the company isn't facing a fiscal crisis. In fact, given its continued profit growth since then, Digital Realty Trust could begin raising its dividend payments again in the foreseeable future, lighting a fresh fire under the stock.
