The S&P500 has recently soared to new highs, but some of the strongest companies that pay regular dividends are trading well below their highs. This has increased their dividend yields and indicates that they may be undervalued.
Here are two top dividend stocks to buy for the long term.
Start your morning smarter! Wake up with Breakfast news in your inbox every market day. Register for free »
Real estate income (NYSE:O) is a leading real estate investment trust (REIT) with a 55-year record of paying dividends to investors. As a REIT, it is required to pay out at least 90% of its taxable income (excluding capital gains) to investors, and another attractive aspect of the company is that it pays dividends monthly.
The first thing you notice is the dividend record of half a century. This means that Realty Income has operated its business profitably during several downturns in the economy. This record ultimately reflects the diversification and quality of the tenant portfolio. The portfolio totals more than 15,400 properties around the world. Its largest customers include industry leaders such as FedEx, Wynn Resorts, WalmartAnd Home Depot.
Realty Income makes it a priority to invest in properties where clients are or have the potential to become leaders in their industries. Management is clearly interested in generating sustainable cash flow, which can support dividend payments over many years.
The company still sees many opportunities to invest in new real estate and grow the value of the company. Management has raised investment volume expectations to $3.5 billion for 2024 and expects to report full-year adjusted funds from operations per share between $4.17 and $4.21, representing a nearly 5% increase in middle of the bandwidth.
Realty Income currently pays a monthly dividend of $0.2635 per share. With the stock trading 28% below its recent highs, the forward yield has risen to 5.41%. Now is a good time to consider adding shares. If rates stabilize or fall, there will be more demand for high-yield stocks, which could push Realty Income’s stock price higher in the coming year.
Hershey (NYSE:HSY) is the leading confectionery brand and also has a range of leading snacks such as Skinny Pop in its arsenal. Brands like Reese’s, Kit Kat, Jolly Rancher and Hershey have been around for a long time and aren’t going anywhere, but Wall Street has significantly underestimated the company’s value given the recent weakness in discretionary spending. The stock is currently down about 35% from its previous peak.
Despite weak consumer spending this year, Hershey is on track for full-year sales growth of 1%, with adjusted profit expected to decline 2% to $9.40, due to a spike in cocoa prices. Of that revenue, Hershey currently pays a quarterly dividend of $1.37 per share, bringing its forward yield to 3%.
This is a unique opportunity to add this quality company to your portfolio. Hershey’s dividend yield has reached 3% only a few times in the past two decades.
It’s a good bet that people won’t lose their sweet tooth. They will still be buying chocolate decades from now. Statista estimates the confectionery market at $586 billion and is estimated to grow at an annual rate of 5.4% through 2029.
Inflation has hit Hershey and its customers hard, but it won’t always be that way. When a top company is struggling with external problems in its industry or the broader economy, investors may invest at a stock price that undervalues the company’s intrinsic value. Ten years from now, investors will likely look back and see Hershey’s high dividend yield as a buying opportunity.
Consider the following before purchasing shares in Realty Income:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $912,352!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns November 4, 2024
John Ballard has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends FedEx, Hershey, Home Depot, Realty Income, and Walmart. The Motley Fool has a disclosure policy.
2 Great S&P 500 Dividend Stocks That Are Down 28% or More to Buy and Hold Forever was originally published by The Motley Fool
