PepsiCo (NASDAQ:PEP) is an iconic food and beverage company, offering everything from soda to chips to oatmeal. And its stock provides a generous 3% dividend yield backed by nearly five decades of annual dividend increases.
But if you’re looking for yield from the value stocks in your portfolio, you can do better than PepsiCo. Here are three more attractive high-yield options to consider today.
1. W.P. Carey: Every year since day one
If PepsiCo’s dividend streak impresses you, then you should take a look at higher-yielding W.P. Carey (NYSE:WPC). It has increased its dividend annually since it came public in 1998.
Although that’s shy of the Dividend Aristocrat status that PepsiCo has achieved, it’s hard to complain about the dividend consistency here. And the real estate investment trust’s (REIT’s) yield is a heady 6.1%. That’s double what you’d get from PepsiCo and four times as much as you’d get from an S&P 500 Index fund.
Meanwhile, like PepsiCo, W.P. Carey has a widely diversified business, with properties in the industrial (25% of rents), office (23%), warehouse (22%), retail (18%), and self-storage sectors (5%). The “other” sector rounds things up to 100%. It also generates around 40% of its rent roll from outside of the United States.
It’s one of the most diversified REITs you can buy. Thanks to its high yield, consistent dividend growth, and diversified portfolio, W.P. Carey is a great alternative to PepsiCo for those seeking generally conservative high-yield fare.
2. Kellogg: Out-of-favor opportunity
Next up is Kellogg (NYSE:K), which offers a roughly 3.8% yield today. It honestly doesn’t stack up nearly as well as W.P. Carey does, but it’s trading near the high end of its historical yield range. That suggests it’s trading at a potentially attractive price point right now.
Most people probably think of Kellogg as a cereal maker. However, over the past few years, it has overhauled its portfolio. Today, snacks make up around half of the company’s sales, which puts it in a similar space to PepsiCo. The rest of Kellogg’s top line comes from cereal (about a third of sales) and frozen goods (the rest).
Kellogg also generates around 40% of its sales from outside of the United States, which provides geographic diversification. Although Kellogg doesn’t make soda, its business has some major similarities to PepsiCo and both definitely fall soundly into the consumer staples sector.
The problem is that Kellogg is calling for sales to drop 1% in 2021. But that’s following on material growth in 2020 driven by social distancing and work-from-home trends during the coronavirus pandemic.
When management adjusts for that one-year windfall event, it believes growth will come in at a reasonable 2.5% two-year annualized rate. That’s a solid number and suggests that management’s repositioning effort is paying off. If you can look past the headline numbers to see the underlying trends, you might want to add the potentially misunderstood Kellogg to your buy list.
3. Total SA: A changing giant
Last year was a terrible one for any company connected to oil, thanks to demand declines related to the pandemic. There was also a major shift in sentiment, with clean energy becoming a more prominent focus as the world looks to reduce its carbon footprint. Thus, Total yields a hefty 6.6% today.
But here’s the thing — Total is well aware of the changes taking shape in the energy industry and was already preparing for a cleaner future. It recently laid out more specific plans, but there’s really nothing new here.
Effectively, Total will be limiting its oil investment to its best opportunities, expanding its natural gas push (this energy source is expected to be a key transition fuel), and aggressively growing its “electrons” business. And while doing all of this, the company plans to hold the line on its dividend, unlike some of its peers that cut their dividends in 2020 so they could make the same energy transition Total is undertaking.
So far, 2021 has been a pretty good year for energy companies, as rising oil prices have led to expectations for improved results. But Total is really a longer-term play on the energy transition toward cleaner alternatives. Essentially, it’s using its still solid carbon-based fuel operations to change with the times. If that sounds like a good plan, you might want to dig into this high-yielder’s stock a little bit more today.
PepsiCo is nice, but…
There’s no question that PepsiCo is a great company and most investors would be wise to consider it and its 3% yield. However, there are other options out there that should also be considered.
A great all-around choice for safety and income is REIT W.P. Carey. In the food space, out-of-favor Kellogg could be a solid alternative. And for those willing to take on a bit more uncertainty, transitioning Total might be worth examining. All three offer higher yields — W.P. Carey and Total notably so — and have strong stories backing their businesses.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.