The stock market has taken investors on quite a roller-coaster ride in the past year. It tumbled due to concerns that tariffs could cause an uptick in inflation and a slowdown in economic growth. However, it has bounced back as the U.S. has walked back its initially high tariff rates.
While most stocks have recovered much of their tariff-driven losses, several are still down quite a bit from their recent highs, and one benefit of lower stock prices is that dividend yields move in the opposite direction. Because of that, several top dividend stocks currently offer yields well above 3%, which is more than double the S&P 500's dividend yield (recently below 1.5%).
Three stocks that stand out for their high yields are Prologis(NYSE: PLD), PepsiCo(NASDAQ: PEP), and NextEra Energy(NYSE: NEE). Here's why investors should consider scooping up shares before they bounce back.
Image source: Getty Images.
Its headwinds should fade
Prologis is a terrific dividend stock. The real estate investment trust (REIT) has grown its payout at a 13% compound annual rate over the past five years. That's faster than the S&P 500 (5%) and REIT sector (6%). Prologis' growing payout and a more than 15% slump in its stock price from its 52-week high have pushed its yield up to 3.6%.
The REIT's stock price has declined because "policy uncertainty is making customers more cautious," commented co-founder and CEO Hamid Moghadam in the first-quarter earnings press release. That's causing a slowdown in leasing activity, which is impacting rent growth and occupancy.
Prologis is performing well despite this headwind. Its core funds from operations increased by 10.9% in the first quarter, driven by the company's strong execution in the period. Meanwhile, the longer-term outlook is very positive because a limited supply of new warehouses and high construction costs should support continued rent growth as demand for warehouse space grows. That should enable the REIT to continue increasing its high-yielding payout at a healthy rate.
Dividend royalty on sale
Shares of PepsiCo have fallen nearly 30% from their 52-week high. That has helped drive the beverage and snacking giant's dividend yield up to 4.3%.
That's an attractive level for a company with such a strong record of dividend growth. PepsiCo recently hiked its payout by another 5%, which extended its dividend growth streak to 53 straight years. It kept the company in the elite group of Dividend Kings, companies with 50 or more years of annual dividend increases.
PepsiCo is in an excellent position to continue growing its dividend. While the company is facing some near-term headwinds from a more cautious consumer and tariffs, its longer-term outlook is bright.
PepsiCo is investing heavily in product innovation, productivity gains, manufacturing capacity, and other drivers. The company expects these catalysts to deliver 4% to 6% annual organic revenue growth, which, along with improving margins, should support high-single-digit annual earnings-per-share growth. Meanwhile, PepsiCo has a strong balance sheet, which enables it to make strategic acquisitions to enhance growth, like its recent $1.7 billion deal for healthier soda maker Poppi.
Powerful growth ahead
Shares of NextEra Energy have slumped nearly 20% from their 52-week high. That has helped drive the utility's dividend yield up to 3.2%
NextEra Energy has an exceptional record of growing its dividend and has increased its payout annually for the past three decades. For the past two decades, its dividend has grown at a double-digit annual rate. NextEra currently expects to maintain that pace through at least next year.
The utility is in an excellent position to continue growing in the future by capitalizing on the expected surge in power demand. Catalysts like data centers, the electrification of everything, and the onshoring of manufacturing could power a 55% increase in U.S. electricity demand by 2040.
That's driving robust growth for the company's renewable energy business. It positions NextEra Energy to grow its earnings at a mid- to high-single-digit annual rate for several years. That robust growth rate should propel NextEra's stock higher in the future.
Great stocks to buy for income and upside potential
Shares of Prologis, PepsiCo, and NextEra Energy are still well below their recent highs. Because of that, investors can lock in higher yields on these high-quality dividend stocks. On top of that, the trio offers compelling upside potential as their stock prices recover and they grow their earnings. That makes them great stocks to buy for investors seeking strong total-return potential.
Should you invest $1,000 in Prologis right now?
Before you buy stock in Prologis, 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 Prologis wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $598,613!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $753,878!*
Now, it’s worth notingStock Advisor’s total average return is922% — a market-crushing outperformance compared to169%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
Matt DiLallo has positions in NextEra Energy, PepsiCo, and Prologis. The Motley Fool has positions in and recommends NextEra Energy and Prologis. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.
