My 2 Favorite Stocks to Buy Right Now

Key Points

• I'm a high-yield dividend investor.

• I recently added to my position in this consumer staples Dividend King.

• I have a full position in this retail giant, but I'd add more if I didn't.

• 10 stocks we like better than Realty Income ›

My preference as an investor is to own well-run companies that pay me well to own them via reliable, and hopefully growing, dividends. And I like to buy stocks when Wall Street is downbeat on the shares.

I've recently added to a position I have in an out-of-favor Dividend King, and if I didn't already have a full position in this retail giant, I'd happily add to the high-yield stock.

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Here are my two favorite stocks to buy right now, assuming you're a dividend lover like I am.

Adding to a Dividend King

For a long time I owned Ventas (NYSE: VTR), which is a healthcare-focused real estate investment trust (REIT). It is a well-run company, but the business changed materially, going from being largely a landlord to one that owns and operates its own properties (by hiring property managers). It was no longer the company I bought, so I sold it and bought PepsiCo (NASDAQ: PEP), a down-on-its-luck consumer staples giant.

Image source: Getty Images.

PepsiCo is one of the largest snack makers, one of the largest beverage makers, and has a material packaged food business, as well. It is one of the most diversified food companies you can buy. It stands toe to toe with its peers when it comes to scale, distribution, and research and development.

It is also a Dividend King, with over five decades' worth of annual dividend increases behind it. You don't build a record like that without having a strong business plan that gets executed well in good times and bad times.

Right now is a bad time. In fact, after I bought the stock it proceeded to drop another 15%. So I bought more, bringing it to a full position in my portfolio. Today, the shares are down around 30% from their 2023 highs, and the 4.3% dividend yield is near the high end of the stock's historical yield range.

To my eyes this is a historically well-run company that is trading at an attractive price. Sure, there are some headwinds right now, notably including inflation and relatively slow growth. Periods like this happen. I believe PepsiCo will be fine over the long term and that Wall Street will eventually afford it a higher valuation. In the meantime, I get to collect a fat and still growing dividend.

I'd add more of this high-yielder if I didn't already own so much

My second highlight here is Realty Income (NYSE: O), a REIT that is focused on single-tenant retail properties. It is already a full position in my portfolio, so for diversification reasons I'm not going to add to it. But I am quite happy dividend reinvesting at the current levels, and I'd suggest anyone who doesn't own it take a close look.

Realty Income is the largest net lease REIT, which means that its tenants pay for most property-level expenses. While it is focused on retail properties, it also owns industrial assets and a collection of "other" assets, which includes vineyards and casinos. And the company has branched into lending and offering asset management services to institutional investors. On top of that diversification, Realty Income's portfolio is spread across the United States and Europe. It is one of the most diversified REITs you can buy.

The dividend has been increased annually for three decades. The dividend yield is currently 5.6% and the stock is down nearly 30% from its pre-coronavirus pandemic high. To be fair, Realty Income is a tortoise, but that's OK given the lofty yield. And I just keep letting the dividend reinvest for now. When I need the income to live off of in retirement I expect to be well rewarded for sitting tight when Wall Street shifted its focus to more exciting investments, like mega-cap technology stocks.

I try to forget about what other investors think

The S&P 500 index (SNPINDEX: ^GSPC) goes up and it goes down. I can't control that, and, in fact, I try to ignore that market gauge as much as possible. The truth is that watching stock price movements stresses me out, and I don't like to be stressed out. Instead, I try to focus on the businesses I'm buying. As long as I continue to believe in a business I'll keep owning it and, sometimes, add to it if I think it's attractively priced. Right now I think PepsiCo and Realty Income are good buys; maybe you will, too.

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Reuben Gregg Brewer has positions in PepsiCo and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.