Most people don't like seeing stock prices go down. It triggers a very natural emotional response associated with pain and loss. But for long-term investors, lower share prices are a good thing. There is a famous expression that the stock market is the only store where people panic and run out when things go on sale.
Lower prices mean higher yields and more dividend income for investors. However, dividend stocks should always have strong business fundamentals. Otherwise, a high yield could signal problems that could cause headaches later.
These four fantastic dividend stocks have emerged as hot deals investors should consider doubling up on. Their abnormally high yields represent buying opportunities because they have the high-quality fundamentals to support them. You can confidently buy them and expect the dividends to pile up.
1. Pfizer (6.8% yield)
Pharmaceutical giant Pfizer(NYSE: PFE) has grappled with steady market pessimism stemming from COVID-19 vaccine sales drying up and, more recently, worries over how the new U.S. government administration might treat pharmaceutical companies.
These fears are reflected in the stock's dividend yield, which has shot up to 6.8%, well above its decade average of 4%. However, management recently raised the dividend for the 15th consecutive year, and the dividend payout ratio is strong at only 58% of 2025 earnings estimates.
Pfizer shows promise. The company has positioned itself for growth in oncology, including a $43 billion acquisition of Seagen to boost its pipeline. Plus, Pfizer could enter the hot GLP-1 agonist market over the coming years. It's currently developing danuglipron, an oral weight loss GLP-1 agonist. Patients must inject GLP-1 agonists for now, so bringing a more convenient oral treatment to market could help Pfizer break into the industry.
2. PepsiCo (3.6% yield)
Food and beverage conglomerate PepsiCo(NASDAQ: PEP) faces similar scrutiny from an administration that could look to restrict artificial ingredients. Additionally, consumers have begun pushing back on price increases, resulting in slipping volumes in developed markets.
But make no mistake: Investors can count on the dividend. The company is a Dividend King with 52 consecutive annual dividend raises. People never stop buying food and drinks, so PepsiCo generates resilient earnings. The 65% dividend payout ratio (based on 2025 earnings estimates) leaves plenty of financial breathing room.
PepsiCo should remain a slow and steady grower, with analysts expecting mid-single-digit long-term earnings growth that can fund future dividend increases. The company is continually expanding, too. PepsiCo recently announced acquisitions of up-and-coming specialty food and beverage brands, including Siete Foods and Poppi prebiotic soda.
3. Realty Income (5.5% yield)
Companies that acquire and lease properties, called real estate investment trusts (REITs), make it easier for individuals to invest in real estate. Realty Income(NYSE: O) is one of the most popular REITs. Management has raised the dividend for 32 consecutive years, and the stock pays a monthly dividend, a rarity because most U.S. corporations pay quarterly.
Realty Income specializes in retail properties. Its portfolio includes 15,621 properties across the United States and Europe. It rents to over 1,500 tenants, usually consumer-facing businesses like restaurants, dollar and convenience stores, and more.
Realty Income and other REITs are sensitive to interest rates because they borrow to fund property deals. Higher interest rates can hurt the business by making debt more expensive. As a result, Realty Income's share price has slid, and the yield has drifted notably above its long-term average.
However, this is not a red flag. Realty Income has raised its dividend through multiple recessions over the past several decades and a global pandemic in 2020. The company's funds from operations cover the dividend with about 20% to spare, so investors can trust Realty Income to deliver.
4. British American Tobacco (7.2% yield)
British American Tobacco(NYSE: BTI) is a global company that sells cigarettes and other nicotine products. Cigarettes have been in decline for years, but tobacco companies have proven notoriously resilient. The addictive properties of nicotine give them the power to raise prices to help offset volume declines.
The company takes its dividends very seriously. It's a high-yield dividend stock with a whopping 6.3% average yield over the past 10 years.
British American Tobacco's dividend yield has climbed well above its average in recent years in a market that has heavily favored growth stocks. That has begun shifting recently but remains above its average at 7.2% today.
The company is slowly transitioning to next-generation products, like electronic vapes and oral nicotine. Analysts estimate that British American Tobacco will grow earnings by 4% annually over the long term. That won't make you rich but should pad the company's 66% payout ratio and fund future raises.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer and Realty Income. The Motley Fool recommends British American Tobacco P.l.c. and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.
