In recent weeks, the broader market has veered toward a correction. The S&P 500 is down roughly 10% from its high, and the technology-heavy Nasdaq Composite has dropped approximately 14% from its peak. Don't be alarmed; drawdowns are a normal part of long-term investing, especially after such a strong run since early 2023.
When fear permeates the market, it's often a great time to start looking for deals. As the great Warren Buffett has said, be fearful when others are greedy and greedy when others are fearful.
Rates coming down would be bullish for this top-notch REIT
Realty Income(NYSE: O) is a real estate investment trust (REIT). It acquires and leases properties to consumer-facing tenants, such as retailers and grocery, convenience, and drug stores. Realty Income and other REITs must distribute at least 90% of their taxable income to shareholders, making them fantastic dividend stocks. The stock yields 5.6% today, and management has raised the dividend for 32 consecutive years. Realty Income is an excellent choice for income-focused investors, and its dividend streak underlines management's strong track record.
The stock has had a rough go in recent years; shares are down 25% from their former highs. Realty Income depends on borrowing money to fund new property deals (growth), so higher interest rates over the past couple of years have been a headwind. Despite that, Realty Income's funds from operations per share have risen nearly 12% over the past three years, so the company has grown despite the stock's slide.
Today, Realty Income trades just over 13 times its operating cash flow, near the low end of its 10-year range. The Trump administration has set its sights on lowering interest rates, potentially boosting Realty Income's business if debt becomes less expensive. Also, steady dividend stocks like Realty Income may become more appealing to investors if the market remains shaky. That makes the stock a compelling buy today.
A railroad stock selling off due to tariff drama
The tariff drama between the United States and Canada has dominated headlines. Canadian National Railway(NYSE: CNI) has felt the heat; shares have declined nearly 30% from their high. The Canadian company is one of North America's leading railroads, a wide-moat industry with decades of steady demand. Canadian National Railway's rails span 18,800 miles across Canada and the United States, transporting large quantities of resources like petroleum, chemicals, grains, and other goods.
Railroads remain the most efficient way to transport these items, and it's unlikely to change soon. However, the tariffs and threat of a recession could create short-term turbulence for the company. Fortunately, Canadian National Railway has excellent management that has guided the company through previous volatility. That's evident from the company's 29 consecutive annual dividend raises.
Today, Canadian National Railway's dividend yield is 2.55%, its highest ever, aside from the global financial crisis of 2008. Yet, analysts estimate the company will grow earnings by an average of 9.6% annually over the long term. Additionally, the dividend is well covered, with a payout ratio of only 44% of estimated 2025 earnings. The stock's decline seems like noise more than substance, so consider buying this dip.
Souring real estate sentiment has put this dividend stock on sale
Carlisle Companies(NYSE: CSL) isn't a name many consumers will recognize, but it is well known in the real estate industry. Carlisle Companies sells construction and water-proofing materials for commercial buildings. The business has steadily grown for decades on commercial construction throughout the U.S., and now, the looming efficiency upgrades and remodeling needs could fuel growth for decades longer. The average commercial property in America is over 53 years old.
The stock has fallen on recession fears, and an economic slowdown could temporarily stall investments in commercial properties. However, the long-term trend seems intact, and management has shown an ability to navigate economic cycles. The company has raised its dividend for 48 consecutive years, spanning multiple recessions, elections, and crises.
Ultimately, Carlisle Companies seems poised for substantial long-term growth. Analysts estimate the company will grow earnings by an average of 15% annually over the next three to five years. Meanwhile, management hopes to grow earnings per share from about $20 in 2024 to over $40 by 2030. The stock trades at only 15 times 2025 earnings estimates today. The anticipated growth and cheap valuation make Carlisle Companies a compelling dividend stock investors should consider buying.
Should you invest $1,000 in Realty Income right now?
Before you buy stock in Realty Income, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $745,726!*
Now, it’s worth notingStock Advisor’s total average return is830% — a market-crushing outperformance compared to164%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.
