Dividend investors tend to focus heavily on dividend yields, which seems like a pretty logical starting point. However, yield alone can tell you only so much about an investment; you need to delve into the story behind it as well.
This is why risk-averse investors will like Realty Income (O +0.93%) and its 5.5% yield. Turnaround lovers will appreciate PepsiCo (PEP 0.17%) and its 4% yield. And risk-tolerant investors might want to jump aboard Ares Capital's (ARCC 0.92%) huge 9.3% yield.
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Realty Income is boring, and that's good!
Realty Income is a net lease real estate investment trust (REIT) focused on single-tenant retail assets. Net leases require tenants to pay for most property-level operating costs. While any single property is a high risk because there is just one tenant, across a large enough portfolio, the risk is actually quite low.
NYSE: O
Key Data Points
For starters, single-tenant retail assets are very similar to one another, making them easy to buy, sell, and release as needed. And Realty Income is the industry's largest player, with over 15,500 properties and an investment-grade balance sheet.
The REIT is incredibly reliable, with a monthly dividend that has been increased annually for three decades. Dividend growth over that span averaged around 4.2% a year, but slow and steady should be highly attractive when you pair it with a 5.5% yield.
Realty Income is a foundational dividend pick for conservative investors. And the stock is down around 20% from its 2022 highs, so it appears to be on sale right now as well.
PepsiCo is a turnaround story
PepsiCo is one of the world's largest consumer staples companies, with products in the beverage, snack, and packaged food niches. It is also a Dividend King, with over 50 consecutive annual dividend increases.
Over time, it has proved to have a strong business model that executes well in both good times and bad. And although right now isn't exactly a bad time, it is certainly less than good.
In the third quarter of 2025, organic sales rose 1.3%. That paled in comparison to key competitor Coca-Cola's 6%. PepsiCo is aware that it needs to improve its growth outlook. To that end, it has made several acquisitions that will better align its brand portfolio with consumer preferences.
It is also working with an activist investor on ways to improve profitability. This effort may involve jettisoning the company's bottling operations, which would better align PepsiCo's model with that of Coca-Cola.
NASDAQ: PEP
Key Data Points
Given PepsiCo's long history of success, dividend investors should probably give management the benefit of the doubt. If you buy into this turnaround story while the stock remains in the Wall Street doghouse, you can lock in a historically high 4% yield while you're at it.
Ares Capital is a high-risk, risk high-yield stock
By the very nature of Ares Capital's business, it is a high-risk income stock. Unlike Realty Income and PepsiCo, Ares Capital's dividend has proved to be highly variable over time.
Conservative dividend investors should probably steer clear of it. However, this business development company (BDC) is an industry leader with a long history of success behind it.
Business development companies make loans with high interest rates to smaller companies that have limited access to capital. When the economy is strong, this can be highly profitable. When a recession occurs, however, BDCs can be left with a large number of loans that aren't being repaid in a timely fashion.
Ares is accustomed to working with troubled customers, but the number of such customers tends to increase during economic downturns. And that can -- and has -- led to dividend cuts.
NASDAQ: ARCC
Key Data Points
The company is designed to pass income on to shareholders. So dividends tend to rise again when performance improves. You just have to go in understanding that the dividend is, by nature, variable. With a 9.3% dividend yield, more-aggressive investors may see that as a worthwhile risk/reward trade-off given that Ares is a large and generally well-respected BDC.
Three brilliant high-yield options
Every dividend investor is different, and so is every dividend stock. That is to say that Realty Income will likely appeal to a different type of investor than PepsiCo will. Ares Capital will also be attractive to yet another different type of investor. However, this trio of dividend stocks offers investors a spectrum of options based on risk. The choices are hard to ignore, especially when considering their attractive yields.
