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Dividend stocks are an important part of a diversified portfolio. They provide passive income under almost any conditions, which strengthens your portfolio and protects your money in changing economies.
Younger investors may want to focus more on growth, and retirees tend to switch to more dividend stocks. Whichever category you're in, if you're looking for excellent dividend stocks, consider Realty Income(NYSE: O), Home Depot(NYSE: HD), and Coca-Cola(NYSE: KO).
1. Realty Income: All the right features plus monthly payments
Realty Income is a top dividend stock that has an excellent business, high yield, and growing dividend, and it also has the added perk of cutting a monthly check.
It's a real estate investment trust (REIT), a business structure for companies that own and lease out rental properties. Realty Income is one of the largest REITs in the world, with more than 15,000 properties that it leases mostly to retailers. Its top 20 tenants include brands like Walmart and CVS, chains that do well in most circumstances and can keep up their leases. Although it touts that as an obvious advantage, it has also expanded to other categories through recent acquisitions and contracts.
It made a recent deal with Wynn Resorts, and 14% of its properties are in the industrials category. However, retail accounts for nearly 80% of the total, with grocery and convenience stores accounting for almost 20%. In other words, it has a stable and growing business, which is important in a dividend stock.
Another reason to be confident about Realty Income's ability to pay and grow its dividend is its extensive track record. It has paid a dividend for 655 months consecutively, and raised it 128 times since going public in 1994.
The dividend yields 5.9% at the current price, or more than 4 times the S&P 500 average. It's an excellent dividend pick for just about any investor.
2. Home Depot: The industry leader
Home Depot is the largest home improvement chain in the world. It has 2,300 stores in the U.S., Canada, and Mexico, and it's opening new ones, although at a slow pace. People always need home improvement products, providing organic growth opportunities for Home Depot all the time.
The company has been challenged by the pressured housing market, but when people aren't moving they also have home improvement needs, since they might need more home maintenance in their current digs. Sales increased 6.6% year over year in the 2024 fiscal third quarter (ended Oct. 27), but comps were down 1.3%. Operating margin and net income were both down from last year but beat expectations.
Home Depot is constantly upgrading its platform and converting to a heftier omnichannel model to meet today's consumer needs. It recently unveiled a larger regional distribution network with 19 fulfillment centers across the country, and it can reach 90% of its customers with same- or next-day delivery. The company launched a marketing campaign to highlight its reach and is already seeing results in higher conversions and incremental sales.
The underlying strength of this business supports its excellent dividend. It yields 2.2% at the current price, well above the S&P 500 average, and it has increased more than 280% over the past 10 years.
3. Coca-Cola: The Dividend King
Coca-Cola is the classic great dividend stock. It's a Dividend King, and the company has raised its dividend annually for the past 62 years, under all kinds of circumstances. It's totally committed to the dividend, and its payout ratio reached more than 100% early in the pandemic when sales plunged.
It's the largest all-beverage company in the world, and it reaches customers in 200 countries all over the world. It has pricing power in its loved brands, which is why Coca-Cola is so reliable for strong performance. It's the top worldwide brand in the non-alcoholic, ready-to-drink category, and it has developed all kinds of packaging and pricing changes to entice its fans even in the inflationary climate. Revenue dropped 1% in the 2023 third quarter, but organic revenue was up 9%.
Coca-Cola has opportunities in acquiring new brands and capturing greater market share, and it has organic growth potential in its diverse beverage categories that include sparkling drinks, dairy, juice, coffee, and more.
The dividend yields 3.1% at the current price, and it's an excellent choice for a reliable, high-yielding stock.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot, Realty Income, and Walmart. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.
