Key Points
This has been a wild year, marked by geopolitical tensions, trade tariffs, rising energy costs, and persistent inflation. Despite these challenges, the stock market has remained resilient, delivering a 12% gain this year and projected double‑digit returns for the fourth consecutive year.
Investors should not remain passive. Growing concerns over the $40 trillion U.S. national debt and escalating bond yields are increasing borrowing costs. As the fourth quarter begins, focusing on dividend‑paying companies with a track record of consistent, generous shareholder returns is a prudent strategy.
Both companies present strong cases for Q4 consideration: Realty Income (NYSE: O) and International Business Machines (NYSE: IBM).
Image source: The Motley Fool.
Top Dividend Pick #1: Realty Income
Realty Income stands out for its reliable dividend and diversified portfolio. As a real‑estate investment trust (REIT), it owns roughly 15,500 commercial properties leased to 1,800 tenants across 92 industries, providing built‑in diversification that cushions against sector‑specific downturns.
The largest sector exposure is grocery stores (11.1% of rental income), but the portfolio also spans convenience stores, home‑improvement outlets, dollar stores, fast‑food restaurants, automotive centers, drugstores, and fitness facilities, each contributing more than 4% of income.
Realty Income pays a monthly dividend, having increased payouts 135 times since its 1994 NYSE debut and maintaining payments for 674 consecutive months (over 56 years). For the current year, the stock is up 8.5%, and including dividends, total returns reach 12.5%. The dividend yield sits at 5.3%.
Top Dividend Pick #2: International Business Machines
IBM’s recent performance has been volatile. After a disappointing second‑quarter earnings report, the stock fell about 20% in 2024, marking its worst trading day on July 14.
The shortfall occurred because customers accelerated purchases of memory and storage products ahead of price hikes, delaying some IBM deals that were expected in Q2. Consequently, revenue rose only 1% year‑over‑year to $17.1 billion, and net income was flat at $2.2 billion, with earnings per share of $2.27.
However, the delay is temporary; CEO Arvind Krishna indicated that roughly one‑third of the postponed transactions were finalized in early July and will be reflected in Q3 results. Analysts remain bullish—RBC Capital rates IBM as “outperform” with a $270 price target (15% upside), while Bank of America sets a $330 target (≈40% upside). The company’s dividend yield is 2.9%, considered generous for a technology firm, and the stock appears poised for a rebound heading into Q4.
