You Can Do Better Than Coca-Cola Stock. Buy This High-Yield Dividend Stock Instead

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You Can Do Better Than Coca-Cola Stock. Buy This High-Yield Dividend Stock Instead.

investing ideas :: 2hrs ago :: source - motley fool

By Justin Pope

Coca-Cola (NYSE: KO) might be the textbook example of consistency in the stock market. The company boasts an iconic name known worldwide and continues to shower its shareholders with cash year in and year out.

Coca-Cola is royalty among dividend investors. I mean that literally. Its 64 consecutive annual dividend hikes make it a Dividend King, a rare club of companies with at least five decades of uninterrupted payout growth.

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But that rock-solid steadiness investors love about Coca-Cola can work against it when the price isn't right. And at a hefty 25 times 2026 earnings estimates, investors can do better than Coca-Cola right now. This other stock offers a similarly impressive track record with nearly double the dividend yield and with monthly payouts to boot.

Image source: The Motley Fool.

Pivoting from soda to real estate

Real estate is a timeless investment, especially for generating income. But investors can't easily buy or sell commercial real estate.

That's where real estate investment trusts (REITs) come in. These are publicly traded companies that acquire and lease properties, then pay out most of their taxable income to investors as non-qualified dividends.

Realty Income (NYSE: O) is one of the world's top REITs. The company boasts a global portfolio of 15,571 properties, primarily leased to single-tenant businesses in consumer-facing industries. Think along the lines of grocery and convenience stores, home improvement stores, fast-food restaurants, drug stores, and automotive repair shops. Realty Income also uses a net lease model, which typically makes the tenant responsible for the property's taxes, insurance, and maintenance.

A better dividend at a compelling valuation

Stability is the entire point of Realty Income's business model. The company has raised its dividend for 31 consecutive years, a streak that includes two real estate market crises: the 2008-2009 recession and the COVID-19 pandemic in 2020. If Realty Income can raise its dividend in both situations, investors can feel pretty good about the dividend moving forward.

The financials back that up, too. The current dividend is only 73% the company's guided 2026 distributable cash profits.

Like Coca-Cola, Realty Income doesn't grow very fast. The company's lifetime dividend growth rate of only 4.2% reflects that. Fortunately, the stock trades at a far more reasonable valuation than Coca-Cola does right now.

Whereas investors can value most companies using retained earnings, they can value Realty Income and other REITs using funds from operations (FFO). It's a non-GAAP (generally accepted accounting principles) metric for REITs, since these companies are required to pay out their taxable earnings to investors.

Realty Income trades at less than 15 times its 2026 FFO guidance. Despite Realty Income's modest growth, that's an appealing price for a top-notch dividend stock, especially considering its rare monthly payout schedule.

Should you buy stock in Realty Income right now?

Before you buy stock in Realty Income, consider this:

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.

This article was originally published by The Motley Fool