The inventory market has bought off sharply this 12 months, with the S&P 500 (SNPINDEX: ^GSPC) lately down about 10% since 2025 started. Whereas inventory market sell-offs might be powerful to abdomen, there’s a silver lining to downturns.
Inventory costs and dividend yields have an inverse relationship. So, as a inventory’s worth falls, its dividend yield rises. Due to that, you may money in on a inventory market sell-off by locking in greater yields on some prime dividend stocks.
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ExxonMobil (NYSE: XOM), PepsiCo (NASDAQ: PEP), and Prologis (NYSE: PLD) at present supply dividend yields of round 4%, that are nice ranges for these elite dividend shares.
A well-oiled, dividend-paying machine
Shares of ExxonMobil have tumbled greater than 15% from their excessive level earlier this 12 months. That hunch has pushed the oil large’s dividend yield up to round 4%. That is a lot greater than the dividend yield on the S&P 500 (round 1.4%).
ExxonMobil elevated its dividend cost by 4% earlier this 12 months. That prolonged its annual dividend development streak to 42 straight years — a monitor file achieved by solely 4% of corporations within the S&P 500.
The oil firm is in a robust place to proceed rising its dividend. It produced $34.4 billion in free money movement final 12 months, simply masking its $16.7 billion dividend outlay. In the meantime, the corporate has a fortress-like steadiness sheet with an ultra-low leverage ratio of 6% and $23.2 billion of money.
Exxon is engaged on a method to extend its annual money flows by $30 billion by 2030. It plans to take away billions of {dollars} in structural prices from its enterprise and make investments closely in rising its highest-margin manufacturing. That ought to give it loads of gasoline to proceed elevating its dividend sooner or later.
Satisfying the urge for food of dividend buyers for many years
PepsiCo inventory is down almost 10% from its peak earlier this 12 months. That has pushed up the beverage and snacking large’s dividend yield to three.8%, primarily based on its present dividend cost. The corporate has already introduced that it’s going to enhance its dividend cost by one other 5% beginning in June. That places its forward dividend yield proper round 4%.
That dividend enhance extends PepsiCo’s development streak to 53 straight years. It should hold the corporate within the elite group of Dividend Kings: corporations with 50 or extra years of accelerating their dividend funds.
PepsiCo is in a robust place to proceed rising its dividend. The beverage and snacking large produces masses of cash. It generated $12.5 billion in web money from working actions final 12 months — greater than sufficient to cowl its $7.6 billion in dividend funds.
PepsiCo additionally has a robust cash-rich steadiness sheet (almost $9.3 billion of money, money equivalents, and short-term investments). The corporate makes use of its robust extra free money movement to put money into organically rising its enterprise and make acquisitions (it lately agreed to purchase Poppi for $1.7 billion), which ought to assist continued dividend development.
A number one dividend grower
Prologis inventory has misplaced almost 1 / 4 of its worth this 12 months. That sell-off has pushed up the true property funding belief’s (REIT) dividend yield to round 4.3%.
The main industrial REIT has an important file of rising its dividend. It has elevated its payout for 12 straight years whereas rising it at a 13% compound annual price over the previous 5 years. That is an elite price, because it’s greater than double the tempo of the S&P 500 (5%) and REIT sector common (additionally 5%).
Prologis is in a superb place to proceed growing its dividend. The economic REIT has one of many strongest steadiness sheets within the sector, which permits it to put money into improvement initiatives and make accretive acquisitions.
In the meantime, it is benefiting from robust demand for logistics actual property from catalysts just like the rising adoption of e-commerce. Prologis can also be utilizing a few of its huge land financial institution to develop knowledge facilities, offering it with a further development catalyst.
Decrease inventory costs are driving dividend yields greater
The inventory market sell-off is offering buyers with the chance to money in by shopping for high-quality dividend shares and locking of their greater yields. That positions buyers to generate extra revenue sooner or later, boosting their complete return potential.
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Matt DiLallo has positions in PepsiCo and Prologis. The Motley Idiot has positions in and recommends Prologis. The Motley Idiot recommends the next choices: lengthy January 2026 $90 calls on Prologis. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
