Some of the best dividend stocks in the world are on sale right now. Shares of Federal Realty Investment Trust (NYSE: FRT), Johnson & Johnson(NYSE: JNJ), and PepsiCo(NASDAQ: PEP) are currently down 8% to 27% from their 52-week highs. Those sell-offs have pushed their dividend yields even higher. With elite records of dividend growth — each has delivered more than 50 years of consecutive annual payment increases — they are very attractive investment opportunities right now.
An elite REIT
Shares of Federal Realty Investment Trust have declined nearly 20% from their 52-week high. That slump has pushed the real estate investment trust’s (REIT) dividend yield up to more than 4.5%. That’s over three times higher than the S&P 500‘s sub-1.5% dividend yield.
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Federal Realty has increased its dividend for 57 straight years. That’s the longest record in the REIT industry. It qualifies the company for the elite group of Dividend Kings, companies with 50 or more years of increasing their dividend payments.
A big factor driving the REIT’s consistent growth is its focus on quality over quantity. It has a concentrated portfolio of high-quality retail-based properties in strategically selected metro markets, primarily major cities along the coasts. It focuses on owning open-air shopping centers and mixed-use properties in first-ring suburban locations because they have a high density of high-income consumers. That makes its properties highly attractive to retailers, driving high occupancy levels and steady rent growth. Federal Realty routinely invests capital to enhance its portfolio by redeveloping existing properties or acquiring higher-quality properties, often funding these investments by selling lower-quality locations.
A very healthy dividend stock
Shares of healthcare giant Johnson & Johnson have shed more than 8% of their value from their recent peak. That has helped nudge the company’s dividend yield up to nearly 3.5%. The company also increased its dividend payment by 4.8% earlier this year, extending its growth streak to 63 consecutive years.
Johnson & Johnson is arguably the healthiest high-yielding dividend stock in the world. The company has a pristine AAA credit rating, higher than the U.S. government. It backs that elite bond rating with a strong balance sheet and robust free cash flow. The company ended the first quarter with only $13.5 billion of net debt, or $38.8 billion of cash and $52.3 billion of debt. That’s a small amount considering its nearly $370 billion market cap. The healthcare company also generates about $20 billion in free cash flow each year, even though it’s one of the world’s top investors in research and development (R&D) at over $17 billion last year. It produces more than enough cash to cover its nearly $12 billion annual dividend outlay.
The company’s heavy investments in R&D and inorganic spending, totaling over $30 billion in acquisitions and other external investments over the past few quarters, should drive continued earnings growth. That puts Johnson & Johnson in a strong position to continue increasing its payout.
A satisfying stream of rising dividend income
PepsiCo’s stock has gotten walloped, falling more than 27% from its 52-week high. One benefit of that sell-off is that the beverage and snacking giant’s dividend yield has risen well past 4%. The company also recently hiked its payout by another 5%, extending its dividend growth streak to 53 straight years.
The company produces a lot of cash, which enables it to invest in growing its business and pay its lucrative dividend. It spends money to develop innovative products, increase manufacturing capacity, and improve productivity. PepsiCo expects these investments to drive 4% to 6% annual organic revenue growth and high single-digit annual earnings-per-share growth.
On top of that, the company has a strong balance sheet, which enables it to make strategic acquisitions to enhance its growth. PepsiCo recently closed its $1.7 billion purchase of Poppi as part of its ongoing portfolio transformation toward healthier products. The company’s growth investments should give it plenty of pop to continue boosting its shareholder payout.
Top-quality income stocks
Federal Realty, Johnson & Johnson, and PepsiCo are among the dividend elite by raising their payouts for more than 50 straight years. With their share prices down and yields up, they look like very attractive investment opportunities right now. Income-focused investors can lock in a higher-yielding income stream that should continue growing in the decades ahead.
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Matt DiLallo has positions in Johnson & Johnson and PepsiCo. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.