To be fair, it won't take long for it to offer a higher yield than the 1.3% it currently collects from investors. S&P500 index. Still, investors looking for high-yielding discount stocks may still like it. real estate income (New York Stock Exchange: O), franklin resources (NYSE:Ben)and hormel food (NYSE:HRL) must be provided. But the story behind each stock is much bigger than just an attractive dividend yield.
1. Realty Income is a net leasing giant
Realty Income has an investment-grade balance sheet and has increased its dividend every year for 29 consecutive years. It has the largest market capitalization and real estate portfolio (over 15,400 assets) among net lease real estate investment trusts (REITs). A net lease requires the tenant to pay most of the property-level costs.
And the dividend yield is 5.5%, near the highest level in the last 10 years. So why are stock prices down about 30% from their 2020 highs?
The answer is that interest rates have risen, putting pressure on the profits REITs generate. That makes sense, given the industry's heavy reliance on debt to fund asset purchases.
However, the real estate market has adapted to interest rate changes in the past, and the same is likely to happen this time as well. Realty Income, on the other hand, has a portfolio spanning the US and Europe, offering multiple avenues for growth.
And their size has historically provided them with favorable access to capital, regardless of market conditions. In other words, it's the kind of stock that conservative dividend investors can happily buy and hold for decades.
2. Franklin Resources rises and falls with the market.
Franklin Resources ended the first quarter of 2024 with approximately $1.6 trillion in assets under management. As an asset manager, you earn a percentage of your fees by monitoring all of your funds.
While investors are constantly putting money into and taking money out of the market, asset management companies typically have a fairly fixed customer base. The bigger impact is usually caused by the ups and downs of the stock market.
For example, assets under management in the first quarter were up approximately 16% from year-end 2023 levels. The main factor was the rise in stock prices. It is important to understand that Franklin Resources' financial health will rise and fall with the market.
However, the company has increased its dividend every year for 44 consecutive years. Mutual funds are facing increased outflows, but Franklin Resources is expanding into other areas to offset the impact.
This includes in particular exchange-traded funds and so-called alternative investments. However, concerns about the mutual fund sector turned investors off on the company's stock, which has fallen by about 35% since late 2021. As a result, the dividend yield rose to nearly 5.3%.
But if it can handle some revenue volatility, this asset manager has proven it knows how to reward investors and grow its business over time.
3. Hormel is starting to gain momentum.
Hormel Foods stands out on this list because it is the Dividend King with 58 consecutive years of annual dividend increases. In 2022, the stock is down about 35% from recent highs, and the yield has risen to 3.2%.
This is not necessarily high in absolute terms, but it is close to the highest level in the company's history. Wall Street sold this reliable consumer staples dividend stock.
There are real issues here, including inflation, bird flu, China's slow economic recovery, and the acquisition of Planters just as the nut segment of the snack food sector was starting to slow.
Taken together, these problems are ugly, but each can be overcome when considered individually. Given Hormel's long history of success, it seems reasonable for management to give it the benefit of the doubt.
Meanwhile, the company's first quarter results were pretty strong overall, suggesting Hormel is starting to regain its footing. Buying the stock now could lock you into a historically attractive yield for years to come from an iconic and generally conservatively managed consumer staples company.
act while the opportunity lasts
Investors probably don't need to rush into buying Realty Income, Franklin Resources, or Hormel. But don't let that stop you from taking action. Take some time to get to know these reliable dividend stocks and choose the ones, perhaps all, that fit your portfolio best. After all, given an attractive yield, it's better to lock in the yield at about the right time than to try to time the perfect entry point.
Need to invest $1,000 in real estate income right now?
Before purchasing real estate income stocks, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks What investors can buy right now…and real estate income wasn't among them. These 10 stocks have the potential to generate impressive returns over the next few years.
when to think about it Nvidia This list was created on April 15, 2005…if you invested $1,000 at the time of recommendation. you have $550,688!*
stock advisor We provide investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks every month.of stock advisor For the service more than 4 times The resurgence of the S&P 500 since 2002*.
See 10 stocks »
*Stock Advisor returns as of May 6, 2024
Reuben Gregg Brewer holds positions at Hormel Foods and Realty Income. The Motley Fool has a position in and recommends Realty Income. The Motley Fool has a disclosure policy.
The article 3 Great S&P 500 Dividend Stocks Drop 30% (or More) and You Can Buy Forever was originally published by The Motley Fool.
