The market is trading near all-time highs, which can make it hard to find attractively priced stocks to buy. But don’t fear, there are strong options out there, even for investors who like dividend stocks. Here’s why income investors will want to consider buying, or even doubling up on, Realty Income (O), Hershey (HSY), and Hormel Foods (HRL).

1. Realty Income just raised its dividend
Realty Income is the largest net lease real estate investment trust (REIT). A net lease requires the tenant to pay most property-level operating costs, which, simplifying things greatly, allows the landlord to sit back and just collect rent. Although any single property is high risk, net leases are usually single-tenant properties, so across Realty Income’s 15,400 properties the risk is very low.

Add in an investment-grade rated balance sheet, a globally diversified portfolio, and 30 years of annual dividend increases, and dividend investors will probably find the backstory here very attractive.

That said, the swift rise in interest rates has been a headwind for the REIT sector, which makes use of leverage to fund property acquisitions. Investors have pushed even the biggest and best REITs lower, leaving Realty Income with a yield of 5.5%. That is near the highest levels of the past decade, which suggests that the stock is on sale today.

But don’t go in thinking that there’s a problem — Realty Income just raised its monthly pay dividend (again). This REIT is chugging along just fine even in the face of higher rates.

2. Hershey’s chocolate is getting more costly
Hershey is an icon in the confections space. The consumer staples company has increased its dividend annually for 15 years, with an impressive annualized dividend growth rate of roughly 10% over the past decade. And the 2.6% yield is historically attractive. The company’s growth plans include its ongoing efforts with innovation in its core portfolio, expansion into salty snacks, and a push into global markets with its most prominent brands. So far so good.

The problem is that Hershey is facing an extraordinary increase in the price of a key input, cocoa. But, so far, the company has been able to pass rising costs on to consumers without much trouble. And the massive increase seems to be at least partly driven by speculation. So this issue will probably ease over time.

Then there is the potential headwind from new weight-loss drugs, which work by suppressing appetites. Still, it seems unlikely that chocolate lovers will stop eating chocolate altogether. But Wall Street remains worried that Hershey has passed its prime and is pushing the stock sharply lower. This chocolate giant could be a great choice for investors with a contrarian bent.

3. Hormel is regaining its footing
One quarter doesn’t make a trend, but Hormel (the maker of SPAM) saw broad-based strength across its business in the first quarter of its fiscal 2024. Every division saw volume gains after a stretch of weak performance. To be fair, the company is still facing material headwinds from inflation, a slow COVID recovery in China, avian flu, and a downturn in the nuts segment of the snacks space. While that seems like a long list of issues, which it is, each individual issue is likely to be a temporary one. If you think in decades, this food maker’s current price could be a good entry point.

Why? For starters, Hormel is a Dividend King with 58 years of annual dividend increases behind it. And, second, the collection of negatives noted above has pushed the dividend yield up to a historically high 3.1%. That said, the strong first quarter has started to get long-term investors more interested in the stock. In other words, you should probably consider acting now if owning a Dividend King with a historically high yield is an attractive thought to you.

Don’t miss out on these dividend stocks
Even when the market is near record highs, discerning investors can find attractively priced dividend stocks. You just have to dig in a little and, perhaps, be willing to invest in stocks facing temporary headwinds. That’s exactly why Realty Income, Hershey, and Hormel have high yields and why you should probably consider doubling down on these iconic companies while you still can.

— Reuben Gregg Brewer

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Source: The Motley Fool