It’s always a good time to buy dividend stocks, but it’s even more important when the market is volatile. The market does not look volatile at the moment; the S&P500 is up 25% so far this year and has reached record highs.
However, there are indications that the market is becoming inflated. Valuations are high and if they remain that way this could lead to a correction. There is global macroeconomic volatility as high inflation persists in some regions, and President-elect Donald Trump’s financial agenda could lead to change in the US economy.
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What that means, of course, is that you want to have some solid, reliable dividend stocks in your portfolio. They provide security at all times in challenging times and passive income. Real estate income (NYSE:O), Home Depot (NYSE:HD)And Ally financially (NYSE: ALLY) are three great choices.
Realty Income is a real estate investment trust (REIT). REITs are great dividend stocks because they pay out 90% of their income as dividends. They are usually stable and reliable and deliver high yields, but not always. Realty Income is all that, plus it has a proven track record spanning decades, and it’s one of the few REITs that pays a monthly dividend.
REITs own properties that they rent to tenants, usually on a long-term basis. REITs typically concentrate in a specific sector, and Realty Income is a retail REIT. Recently, however, the company has expanded into areas to grow its property numbers and diversify its assets.
Retail is still by far the top segment, with supermarkets and convenience stores accounting for almost 20% of all rented properties. But it now also counts gaming and industrial customers as tenants. The two top tenants are Dollar general And Walgreens Boots Allianceand the rest of the top customers are mainly essential retailers who can pay the rent even in tough times. In other words, Realty Income’s stable income translates into reliable dividends for shareholders.
Realty Income’s dividend yields 5.4% at today’s price and is reliable for ongoing payments under a variety of conditions.
Home Depot has a long history of competitive performance and its dividend has played a major role in creating shareholder value. Although the company is currently feeling pressure, this is due to external factors: a poor housing market is putting a halt to home sales, which trickles down to lower home improvement sales. But once that turns around, Home Depot will be well positioned to recover.
Trends are moving in the right direction as interest rates drop and home sales improve. Home Depot posted better-than-expected results in its fiscal third quarter 2024 (ended Oct. 27), with sales up 6.6% year-over-year and a 1.3% decline in comparable sales. The company raised full-year guidance across the board, expecting a 2.5% decline in comparable sales and a 4% increase in total sales, plus a 2% decline in earnings per share (EPS ). If Home Depot can end the year on a positive note, it should be ready in 2025.
Investors are bullish on Home Depot despite the pressure, and Home Depot shares are up 23% this year. At the current price, the dividend yields 2.1%, and investors can expect a growing, stable paycheck from Home Depot stock while enjoying stock gains.
Ally is a Warren Buffett stock, and it’s easy to see why. It has a growing business, it’s a bank stock, it’s cheap, and it pays a high-yielding dividend.
It’s the largest all-digital bank in the US, which is saying a lot compared to so many new players SoFi technologies as well as all major banks with their digital presence. However, Ally is best known for its robust auto lending division. It started as the financial segment of General enginesgiving it more than a century of data and experience, but it was only spun off as its own entity a few years ago. Ally remains the nation’s largest auto lender and has built an impressive consumer banking business with high customer retention. It also has all the standard financial products that all major banks have, including investment services, insurance products and credit cards.
Ally continues to attract customers to its fully digital platform, and they will continue to drive revenue in the coming years. Ally is feeling pressure from high interest rates, and its shares tumbled earlier this year on worse-than-expected auto loan defaults. However, interest rates are already rising again now that interest rates are falling.
At its current price, Ally’s shares trade at less than 10 times next year’s earnings and less than 1 times book value. The dividend yields 3.1%, and Ally is an excellent choice for a stable but growing bank stock.
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Ally is an advertising partner of Motley Fool Money. Jennifer Saibil holds positions in SoFi Technologies. The Motley Fool holds positions in and recommends Home Depot and Realty Income. The Motley Fool recommends General Motors and recommends the following options: In January 2025, $25 would appeal to General Motors. The Motley Fool has a disclosure policy.
3 Dividend Stocks to Double Now was originally published by The Motley Fool
