The S&P 500 has slumped in recent months. The index has fallen more than 15% from its recent peak, driven down by concerns that tariffs might cause a recession.
Many stocks have fallen even further than the index, including ExxonMobil (NYSE: XOM), Federal Realty Investment Trust (NYSE: FRT), and PepsiCo (NASDAQ: PEP), which are down 15% or more. They look like even more attractive investments for those seeking durable dividends that could last a lifetime.
Adding more fuel to grow its dividend
Shares of Exxon have fallen more than 15% from their recent peak. That downdraft has driven the oil giant's dividend yield up to 3.8%. That's more than double the S&P 500's 1.4% dividend yield.
Exxon has a magnificent record of paying dividends. The company recently increased its payment by 4%, extending its dividend growth streak to 42 years in a row. Only 4% of companies in the S&P 500 have reached that milestone.
The company has plenty of fuel to continue growing its dividend. It produced $34.4 billion of free cash flow after funding its capital expenses last year, more than enough to cover its $16.7 billion dividend outlay. Meanwhile, Exxon's long-term strategic plan aims to increase its annual cash flow by $30 billion by 2030 through structural cost savings and investments in its lowest-cost assets.
Its focused strategy continues to pay dividends
Federal Realty's stock has slumped more than 20% from its recent peak. That sell-off has pushed up the dividend yield of the real estate investment trust (REIT) to 4.8%. The company has increased its dividend for 57 straight years. That leads the REIT sector and keeps it in the elite group of Dividend Kings, companies with 50 or more years of annual dividend growth.
The company has a simple strategy. It invests in the highest-quality shopping centers and mixed-use properties in the first-ring suburbs of the country's largest cities. Those locations typically have dense populations of high-income households, making them highly desirable for retailers. Federal Realty's properties tend to remain in high demand, enabling the REIT to steadily raise rental rates.
The REIT routinely invests to upgrade its portfolio. It will spend money to redevelop existing properties to make them more appealing to retailers. Federal Realty will also add new property types, such as residential units or offices. In addition, it will buy high-quality shopping centers as they go up for sale, often selling lower-quality properties to fund those new investments.
Continuing to satisfy dividend investors
Earlier this year, PepsiCo announced that it will increase its dividend by another 5% starting with its June payment. That will extend the beverage and snacking giant's dividend growth streak to 53 straight years, keeping its name on the list of Dividend Kings. With its stock down more than 20%, the company's forward dividend yield is up to 4%.
PepsiCo boasts a diverse portfolio of leading brands, including Pepsi, Gatorade, Quaker, and Lay's, which generate relatively stable and growing earnings and cash flow. The company's long-term targets are to organically grow its revenue by 4% to 6% per year while expanding its margin to support high-single-digit earnings-per-share growth. The company invests heavily each year into things that grow its business, including product innovation and manufacturing capacity expansion, and that improve its productivity, such as digitalization, automation, and logistics.
Meanwhile, PepsiCo has a strong balance sheet, which it uses to make strategic acquisitions as opportunities arise to further accelerate growth. For example, it recently agreed to buy Poppi for $1.7 billion to expand its better-for-you offerings and closed its $1.2 billion acquisition of Siete to expand its food portfolio.
Attractive entry points for these durable dividend stocks
Shares of Exxon, Federal Realty, and PepsiCo have all slumped more than 15% from their recent peaks, which has driven up their dividend yields to more attractive levels. With magnificent histories of dividend growth, which seems likely to continue, they're great stocks to buy and hold for a potential lifetime of steadily rising dividend income.
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Matt DiLallo has positions in PepsiCo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
