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Real estate investments provide a yield of 5.5%, although they might seem a bit slow and uneventful.
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On the other hand, PepsiCo offers a 4% yield and is aiming to revitalize its growth.
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Ares Capital presents a riskier option with a yield of 9.3%, but it’s supported by a strong business model.
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10 stocks we prefer over Ares Capital ›
When it comes to dividend investing, yield is often a go-to metric, which makes sense. But focusing solely on yield can be misleading; the context really matters.
This explains why conservative investors might favor real estate income, Realty Income (NYSE: O), with its 5.5% yield. On the other hand, PepsiCo (NASDAQ: PEP) may attract those hopeful for a turnaround at its 4% yield. Risk-takers might lean towards Ares Capital (NASDAQ: ARCC), which boasts a hefty 9.3% yield.
Realty Income operates as a net lease real estate investment trust (REIT) primarily focused on single-tenant retail spaces. These net leases require tenants to cover most operational costs. While depending on a single tenant can be riskier, diversifying across numerous properties generally minimizes this risk.
There’s a certain uniformity in single-tenant retail assets, allowing for smoother transactions when buying or selling. Realty Income stands out with over 15,500 properties and a solid investment-grade balance sheet.
What’s noteworthy is that this REIT has raised its dividend each month for three decades. The average growth rate over that period is about 4.2%, which—when paired with a 5.5% yield—creates an appealing proposition for investors seeking stable income.
For those taking a conservative approach, Realty Income is an essential dividend stock. Interestingly, the stock is currently around 20% below its highs from 2022, making it feel somewhat like a bargain, perhaps.
PepsiCo, a giant in the consumer staples sector with offerings spanning beverages, snacks, and packaged foods, is notable as a Dividend King with more than 50 years of consecutive annual dividend hikes.
Across time, PepsiCo has demonstrated a sound business model that generally performs well, regardless of market conditions. And while things aren’t dire at the moment, they could certainly be better.
In the third quarter of 2025, organic sales grew by just 1.3%, which falls short compared to a competitor like Coca-Cola, which saw a 6% increase. Recognizing this, PepsiCo is taking steps to enhance its growth trajectory, including making acquisitions aimed at aligning its products more closely with consumer preferences.
Moreover, the company is collaborating with activist investors to enhance profitability, which may involve divesting its bottling operations to streamline its model, similar to Coca-Cola.
Given PepsiCo’s extensive history of achievement, cautious dividend investors might want to watch how management navigates this situation. If you believe in the potential for a turnaround—while the stock lingers in a lower market position—you could yield a historically attractive 4%.
In contrast, Ares Capital presents itself as a higher-risk stock. Its dividends can be quite variable compared to the steadiness seen with Realty Income or PepsiCo.
Conservative investors may want to keep their distance. However, as a leading business development company (BDC), it has a noteworthy track record.
BDCs typically offer loans at higher interest rates to smaller enterprises struggling to secure funding. This strategy can lead to substantial profits during strong economic periods, but a downturn might result in delayed repayments.
Ares has experience managing difficult situations, although you can generally expect an uptick in such cases during economic slumps. Not surprisingly, this might prompt dividend reductions.
Companies aim to deliver returns to shareholders, hence benefits often rise when business conditions improve. It’s crucial to note that dividends are not fixed. Still, given Ares’ solid reputation as a BDC—combined with its attractive 9.3% yield—more daring investors might see it as a worthwhile risk.
As every dividend investor has unique preferences, Realty Income will likely resonate more with conservative types, while PepsiCo offers something different, and Ares appeals to those on the riskier end of the spectrum. But despite their various risk profiles, these three stocks present enticing yields for investors to consider.
Before making a decision on Ares Capital, keep the following in mind:
The analyst team identified ten stocks with better prospects that were recommended recently, and Ares Capital wasn’t among them. These selected stocks could yield impressive returns in the coming years.
It’s also interesting to see how some famous names, like Netflix and Nvidia, performed significantly since their initial recommendations back in the day.
To note, the stock advisor found an average return of 958% compared to the S&P 500’s 196%, showcasing a considerable outperformance.
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