In This Article:
Bargain hunting isn't easy in a stock market that has ripped higher for the past two years. However, it's not impossible if you're willing to be a little creative. There is always a deal somewhere; blue chip stocks with temporary bumps and bruises can be great places for long-term investors looking for a deal.
Using this lens, fabulous dividend stocks like Realty Income (NYSE: O), Hershey (NYSE: HSY), and UnitedHealth Group (NYSE: UNH) stand out as compelling buys worth leaning into today. Here is what makes these stocks worthy of your investment dollars right now.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free ?
1. A REIT to own as rates fall
Realty Income is a real estate investment trust (REIT), a company that acquires and leases out real estate. Over the past few years, high interest rates have hurt Realty Income and other REITs (and their stock prices) because they frequently borrow to fund new property deals that grow their business. Now that the Fed has issued its first rate cut, Realty Income is poised to enjoy a more friendly operating environment where debt is cheaper.
As REITs go, Realty Income is one of the best. It runs a portfolio of 15,540 properties rented out to single-tenant businesses, such as grocery, dollar, and convenience stores, restaurants, and other places consumers routinely spend money. Realty Income distributes most of its profits to shareholders by design, making it an excellent dividend stock.
The company has raised its dividend yearly since its initial public offering, a streak of 31 consecutive years. Realty Income still yields 5.2% at its current price, an attractive number for most income-focused investors. The company grows at a low-single-digit rate, which should continue funding increases. The stock is still down almost 25% from its all-time high, but that gap may close if rates continue dropping. Consider buying the stock before that happens.
2. An excellent business working through adversity
Some business models are sweeter than others, and the confectionary industry has traditionally been quite lucrative. Hershey is a dominant player in the U.S. market, where brands like Hershey's, Reese's, Jolly Rancher, Almond Joy, and a variety of others have made Hershey a market-beating stock over its lifetime. Additionally, the company has expanded into the snack segment with Pirate's Booty, Skinny Pop, and Dot's Pretzels.
However, Hershey has grappled with catastrophic farming conditions for cocoa, a key ingredient for many of its products. The soaring price of cocoa has pressured Hershey's business, and earnings growth estimates have taken a big hit and weighed on the stock price. Shares have declined to the point that Hershey's dividend yields nearly 3%, which has only happened a few times since the 1980s.