If you are looking to buy some dividend stocks right now, you'll want to get to know Realty Income (O +0.21%), PepsiCo (PEP 1.07%), and Medtronic (MDT 2.32%). All three are reliable dividend payers with historically high yields, which suggests they are on sale. And if you already own one or two of them, you might want to double up on your investment. Here's what you need to know.
1. Realty Income is the net lease king
Realty Income is more than three times the size of its next-closest peer. It is, hands down, the largest net lease real estate investment trust (REIT) you can buy. Net lease basically means that its tenants are responsible for most property-level operating costs. The company's size, along with its investment grade rated balance sheet, creates a lot of benefits in the net lease niche of the REIT segment.
NYSE: O
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Essentially, Realty Income has advantaged access to capital markets. That provides it with a low cost of capital, allowing it to compete aggressively for properties. Also, it can make acquisitions that its smaller peers couldn't handle on their own. And Realty Income can even act as an industry consolidator.
That said, the REIT's size means that slow and steady growth is likely to be the norm. But when you pair that with a 5.6% dividend yield backed by a dividend that has been increased annually for three decades, well, even conservative investors are likely to get excited.
Image source: Getty Images.
2. PepsiCo is a Dividend King that's muddling through again
If you are looking for a little more growth potential, then you'll probably appreciate PepsiCo. This consumer staples giant is one of the largest beverage makers in the world, is the most important salty snack maker (Frito-Lay), and has a material packaged food business, too (Quaker Oats). It can stand toe to toe with any of its peers with regard to distribution, marketing, and R&D strength. But, like any company, it sometimes goes through hard times. Right now is one of those hard times.
NASDAQ: PEP
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That has left the stock with a historically elevated yield of around 4%. The dividend behind that is supported by a very strong, well-run business. How well run? PepsiCo is a Dividend King, with more than five decades worth of annual dividend increases behind it.
You can't build a record like that by accident, it requires a solid business plan that gets executed well in good times and bad. Now is just a bad time, and that's OK. Management is doing the things it needs to do to get back on track (buying new brands, investing in product development, and refocusing on its operations). It seems likely that PepsiCo will get back to growth again soon enough, just like it has many times before.
3. Medtronic is on the cusp of big things
Medtronic is a large and diversified medical device maker. It has the lowest yield here at roughly 3%, but that happens to be historically high for Medtronic. In other words, like PepsiCo, it looks like Medtronic is on sale right now.
NYSE: MDT
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But there are big things coming. For starters, Medtronic's dividend streak is at 48 years, so in two years it will join the elite ranks of the Dividend Kings. Second, after a dry spell on the new product front, the company is starting to bring out new products again that will start to add to growth. And third, Medtronic is rejiggering its portfolio to highlight higher-margin opportunities. In 2026 it will spin off its low-margin diabetes division, which is expected to immediately improve profits.
Put it all together and it looks like this unloved healthcare giant could be ready to shine again. If that sounds like a good opportunity to you, then you might want to buy Medtronic before Wall Street catches on to the positive trends that are starting to take shape.
Three options for dividend investors to buy or buy more
Realty Income, PepsiCo, and Medtronic are not small companies. Nor are their attractive dividends some hidden secret on Wall Street. That doesn't change the dividend opportunity for investors who don't own them. But given the facts here, you might own one or two of them already. If that's the case, strongly consider doubling up now while the stocks still look relatively cheap.
