The stock market has sold off sharply this year, with the S&P 500 (SNPINDEX: ^GSPC)recently down about 10% since 2025 began. While stock market sell-offs can be tough to stomach, there is a silver lining to downturns.
Stock prices and dividend yields have an inverse relationship. So, as a stock's price falls, its dividend yield rises. Because of that, you can cash in on a stock market sell-off by locking in higher yields on some top dividend stocks.
ExxonMobil(NYSE: XOM), PepsiCo(NASDAQ: PEP), and Prologis(NYSE: PLD) currently offer dividend yields of around 4%, which are great levels for these elite dividend stocks.
A well-oiled, dividend-paying machine
Shares of ExxonMobil have tumbled more than 15% from their high point earlier this year. That slump has driven the oil giant's dividend yield up to around 4%. That's much higher than the dividend yield on the S&P 500 (around 1.4%).
ExxonMobil increased its dividend payment by 4% earlier this year. That extended its annual dividend growth streak to 42 straight years -- a track record achieved by only 4% of companies in the S&P 500.
The oil company is in a strong position to continue growing its dividend. It produced $34.4 billion in free cash flow last year, easily covering its $16.7 billion dividend outlay. Meanwhile, the company has a fortress-like balance sheet with an ultra-low leverage ratio of 6% and $23.2 billion of cash.
Exxon is working on a strategy to increase its annual cash flows by $30 billion by 2030. It plans to remove billions of dollars in structural costs from its business and invest heavily in growing its highest-margin production. That should give it plenty of fuel to continue raising its dividend in the future.
Satisfying the appetite of dividend investors for decades
PepsiCo stock is down nearly 10% from its peak earlier this year. That has driven up the beverage and snacking giant's dividend yield to 3.8%, based on its current dividend payment. The company has already announced that it will increase its dividend payment by another 5% starting in June. That puts its forward dividend yield right around 4%.
That dividend increase extends PepsiCo's growth streak to 53 straight years. It will keep the company in the elite group of Dividend Kings: companies with 50 or more years of increasing their dividend payments.
PepsiCo is in a strong position to continue growing its dividend. The beverage and snacking giant produces lots of cash. It generated $12.5 billion in net cash from operating activities last year -- more than enough to cover its $7.6 billion in dividend payments.
PepsiCo also has a strong cash-rich balance sheet (nearly $9.3 billion of cash, cash equivalents, and short-term investments). The company uses its strong excess free cash flow to invest in organically growing its business and make acquisitions (it recently agreed to buy Poppi for $1.7 billion), which should support continued dividend growth.
A leading dividend grower
Prologis stock has lost nearly a quarter of its value this year. That sell-off has driven up the real estate investment trust's (REIT) dividend yield to around 4.3%.
The leading industrial REIT has a great record of growing its dividend. It has increased its payout for 12 straight years while growing it at a 13% compound annual rate over the past five years. That's an elite rate, as it's more than double the pace of the S&P 500 (5%) and REIT sector average (also 5%).
Prologis is in an excellent position to continue increasing its dividend. The industrial REIT has one of the strongest balance sheets in the sector, which allows it to invest in development projects and make accretive acquisitions.
Meanwhile, it's benefiting from strong demand for logistics real estate from catalysts like the growing adoption of e-commerce. Prologis is also using some of its vast land bank to develop data centers, providing it with an additional growth catalyst.
Lower stock prices are driving dividend yields higher
The stock market sell-off is providing investors with the opportunity to cash in by buying high-quality dividend stocks and locking in their higher yields. That positions investors to generate more income in the future, boosting their total return potential.
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Matt DiLallo has positions in PepsiCo and Prologis. The Motley Fool has positions in and recommends Prologis. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.
