There is a difference between the stock market and a market of stocks. The S&P 500 is currently near all-time highs, yet numerous high-quality stocks within the index trade at bargain valuations. Lower stock prices should excite dividend investors. Lower prices mean more dividend income because your investment dollars fetch higher dividend yields.
Here are some top-notch dividend stocks offering compelling value to consider buying today. These companies have proven their ability to increase dividends while maintaining healthy business fundamentals. You can enjoy the dividend income from these stocks or reinvest in buying more shares, turbocharging the compounding in your portfolio.
Either way, buying a share of each stock could be the smartest use of $500 right now.
Investing in real estate is timeless, but few individual investors can afford commercial properties. Real estate investment trusts (REITs) like Realty Income(NYSE: O) make that possible.
Realty Income specializes in acquiring commercial buildings and renting them to grocery stores, pharmacies, and other single-tenant retail businesses on net leases. By design, REITs distribute at least 90% of their taxable income to investors, making them fantastic dividend stocks. Remember that REITs pay non-qualified dividends, so always consider the tax implications of owning them.
Realty Income stock yields a whopping 6% today. The company’s ability to support and increase a monthly dividend for 31 consecutive years is a testament to Realty Income’s management team and business fundamentals. The company borrows to fund new property acquisitions, so the stock has tumbled due to stubbornly high interest rates (10-year Treasury yields). This blue chip REIT has entered bargain territory under 14 times its funds from operations and will likely bounce back once rates drop.
As efficient as trucks and freight companies have become, railroads remain the best way to move large amounts of goods across long distances. A few railroad companies, including Canadian National Railway(NYSE: CNI), dominate North America. The company operates a network spanning 20,000 miles across Canada and America, transporting petroleum, grains, metals, minerals, and more. Nobody is starting new railroads, so the industry’s incumbents face limited competition.
Those are prime conditions for steady growth, and Canadian National Railway doesn’t disappoint. The company has paid and raised its dividend for 29 consecutive years, offering investors a solid 2.4% starting yield. The stock’s dividend yield is currently the highest it’s ever been outside of 2008-2009. The high yield doesn’t reflect the company’s fundamentals, considering analysts anticipate 7% annualized earnings growth over the long term. That makes Canadian National Railway a smart buy right now.
The hype and attention surrounding weight loss drugs and the nomination of Robert F. Kennedy Jr. as Health and Human Services Secretary have pressured PepsiCo(NASDAQ: PEP) stock. These are legitimate risks for the beverage and snack foods giant, but investors may be overreacting.
PepsiCo is a global entity with a vast portfolio of iconic brands, including Pepsi, Gatorade, Frito Lay, Quaker, and many others. It sells these products worldwide and should have at least an opportunity to adapt to industry changes (assuming these risks even materialize).
In the meantime, the stock keeps dropping, and the Dividend King’s yield keeps rising. PepsiCo’s fundamentals remain world-class. The company can comfortably afford its dividend and boasts an A+ (investment grade) credit rating. Analysts still expect the business to grow earnings by 5% to 6% annually over the long term — plenty of growth to continue its decades-long streak of paying shareholders more money.
The stock’s P/E ratio of 21 is its lowest in a decade, outside of the COVID-19 stock market crash in 2020. As Warren Buffett has said, be greedy when others are fearful.
U.S. confectionary giant Hershey(NYSE: HSY) has struggled with the same headline headwinds as PepsiCo, plus an ongoing generational disruption in the cocoa supply chain. Cocoa is the key ingredient in chocolate, and prices have soared to astronomical levels, pressuring the company’s profit margins. The issue could linger throughout 2025.
Understandably, Hershey’s stock has fallen. Shares now trade under 18 times earnings, valuations last seen more than 20 years ago.
This is a potential home run for long-term investors willing to wait for the company to get back on track. Hershey’s iconic brands, like Hershey’s and Reese’s, aren’t going anywhere, and the company has expanded into salty snacks to diversify its business. The dividend yield is near its all-time high at 3.5%.
Hershey is traditionally very lucrative, so you won’t see such high yields from the stock unless there are problems. It’s up to investors to judge whether they are temporary. Locking in that dividend could make you look like a genius once cocoa prices come down.
Before you buy stock in Realty Income, 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 Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $818,587!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of January 13, 2025
Justin Pope has positions in Canadian National Railway, Hershey, PepsiCo, and Realty Income. The Motley Fool has positions in and recommends Hershey and Realty Income. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.
The Smartest Dividend Stocks to Buy With $500 Right Now was originally published by The Motley Fool
