The S&P 500 is at an all-time high, heralding a new bull market. It’s a great time to buy stocks as they climb, and the anchor of many a great stock portfolio is a mix of strong dividend stocks. Realty Income (O), Home Depot (HD), and Starbucks (SBUX) are three excellent choices to consider now.

1. Realty Income: Reliable monthly income
Realty Income offers everything a dividend investor could want, including a high yield and a reliable and growing dividend. It also has something most dividend stocks can’t match: It pays monthly.

It’s a real estate investment trust (REIT), which means it pays out 90% of its income as dividends. REITs own properties that they rent out to tenants, usually for several years, which provides a strong recurring revenue stream. Dividend investors should have some REITs included in their portfolio, and Realty Income is a no-brainer pick.

Not all REITs are the same, though. They work in a variety of industries, and some come with more risk than others. Realty Income is a retail REIT, which means it leases properties to retailers. Its top 20 tenants are names you know and likely frequent, including stores like CVS, Dollar General, and Walmart. These are established and growing industry leaders that are also cash-rich — which means they can pay their rent.

Realty Income is in growth mode and acquiring other REITs to expand its property count and diversify. It almost doubled when it acquired VEREIT in 2021 and just closed on its acquisition of Spritit last week, adding another 2,000 properties. It now has a total of more than 13,000.

The company has paid a monthly dividend for more than 53 years, even before it went public, and has provided investors with 105 consecutive quarterly increases. At the current price, the dividend yields 5.6%.

Its stock is down 19% over the past year. However, as inflation stabilizes and interest rates are cut, the REIT should thrive. Now may be a great time to buy.

2. Home Depot: The consistent leader in home improvement
Home Depot is the largest home improvement company in North America, with more than 2,300 stores. It also has the highest revenue and net income in the industry.

It hasn’t had an easy time in the current economic climate. Over the trailing 12 months, revenue is down 2% and earnings per share (EPS) are down almost 7%. That’s been in line with management’s guidance. For the full fiscal 2023, management is expecting that to get slightly worse.

There are several factors leading up to this performance, all of them near-term headwinds. Customers are staying away from large, discretionary purchases in the inflationary environment. The pressure in real estate due to high mortgage rates is weighing on it, and it’s facing incredible growth from early in the pandemic.

As soon as these pressures ease, Home Depot shouldn’t have any problem going back to its typical growth patterns. Its stock is already rising on the good news about potential interest-rate cuts, and at the current price, its dividend yields 2.3%.

3. Starbucks: The largest coffee chain in the world
Starbucks is the largest coffee shop in in the world by far with nearly 38,600 stores and $36 billion in trailing-12-month revenue, but it has its sights set on getting bigger. Although its stores are focused on coffee, the company is getting close to becoming the largest restaurant chain in the world overall.

Starbucks faced several unexpected obstacles in the 2024 fiscal first quarter (ended Dec. 31, 2023) due to geopolitical events and cautious consumers in China, who are still recovering from pandemic-related bans. Despite that, the company managed an 8% year-over-year increase in revenue and a 5% increase in comps. Earnings per share (EPS) increased 22% to $0.90, and operating margin improved from 14.4% last year to 15.8% this year.

Management outlined how it’s counteracting softening demand from the occasional U.S. consumer by offering targeted loyalty program incentives, and membership increased 13% year over year. The loyalty program has been a strong growth driver, and converting more customers to the program should lead to more sales.

Starbucks stock is down 13% over the past year, and at this price, its dividend yields 2.4%. As it gains loyal members and customers return to higher discretionary spending, Starbucks should enjoy years of growth and gains.

— Jennifer Saibil

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Source: The Motley Fool