Key Points
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Dividend investors like to buy stocks with 4% yields because they fit well with the 4% withdrawal rule.
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Realty Income and Federal Realty are two industry-leading REITs with 4%+ yields.
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PepsiCo and Hormel are two food companies with 4%+ yields facing what are likely to be temporary headwinds.
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Realty Income (NYSE: O) has increased its dividend annually for 32 years. That’s an impressive streak, but it is actually shorter than the 50+ years of annual dividend increases that Dividend Kings Federal Realty (NYSE: FRT), PepsiCo (NASDAQ: PEP), and Hormel (NYSE: HRL) have rewarded investors with. And all of these stocks have yields above 4%. Here’s why you may want to jump aboard and buy one or all of them before November draws to a close.
What’s so important about 4%?
Dividend investors like 4% yields. The reason is more emotional than anything else and relates to the 4% withdrawal rule. The 4% rule is a rule of thumb that says you can withdraw 4% from your savings in retirement without running out of money. That’s great, but what if your stock portfolio generated an average yield of 4%? Then you would never have to withdraw any money at all. And thus, dividend investors like stocks with 4% yields.
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As of this writing, Federal Realty’s yield is hovering right around 4%, PepsiCo’s is 4.1%, Hormel’s is 5.2%, and Realty Income tops the list at 5.4%. Don’t read too much into those yields, because Hormel and PepsiCo are probably higher-risk options than Federal Realty and Realty Income.
Buy some boring real estate
Federal Realty and Realty Income are both industry-leading real estate investment trusts (REITs). Both focus on retail-oriented properties, but they operate in different niches of the REIT sector. Federal Realty, the only Dividend King REIT, owns strip malls and mixed-use properties. Realty Income owns single-tenant properties and uses a net lease approach. Because their assets don’t overlap, they are complementary holdings.
Federal Realty is a sharpshooter with a portfolio that is typically around 100 properties. It focuses on owning well-located assets with sizable, wealthy populations nearby. It spends a great deal of time and money to ensure that its properties are well maintained and provide modern amenities that customers and tenants want. This Dividend King is a solid choice for conservative dividend investors who favor a buy-and-hold approach.
Realty Income focuses on sale-leaseback transactions that primarily serve as financing for the seller, who then becomes a tenant. Scale is vital, and the REIT is among the largest in the net lease space, with a portfolio of more than 15,500 properties. It can take on transactions that smaller peers couldn’t handle. It also has an investment-grade balance sheet, so it tends to have an advantage in accessing capital markets. That helps it to bid aggressively on properties.
Realty Income’s 5.4% yield isn’t really a sign of risk; it is more a sign of the shifting rate environment, which will increase Realty Income’s funding costs. But property markets will likely adjust to rate changes, as they have before, thereby protecting the profits that Realty Income generates from new acquisitions. And with 32 years of dividend increases, you are clearly buying a reliable dividend payer if you jump aboard.
PepsiCo and Hormel require a little more fortitude
PepsiCo and Hormel are both consumer staples companies with yields well above the sector average of roughly 2%. That’s an indication that both are facing headwinds right now. Of the two, PepsiCo is probably doing better, as it grew organic sales by 3.1% in the third quarter of 2026, while Hormel’s organic sales fell by 2%. That said, PepsiCo is still far behind beverage peer Coca-Cola (NYSE: KO), which grew organic sales by 7%.
While neither PepsiCo nor Hormel are hitting on all cylinders today, they remain well-run businesses. PepsiCo benefits from a globally diversified product portfolio spanning snacks, beverages, and packaged foods. Hormel is largely U.S. focused and specializes in protein-focused packaged foods. More conservative investors will probably prefer PepsiCo. However, there’s a small nuance with Hormel that is important to consider.
The Hormel Foundation controls nearly 47% of Hormel’s stock. The foundation uses the dividends it collects to further its philanthropic efforts and has a stated goal of ensuring that Hormel remains independent. This relationship means that Hormel can make decisions that may upset Wall Street in the near term, but that are in the long-term interests of the company and its shareholders. That’s really what’s going on right now, as Hormel works to reposition for growth. Its status as a Dividend King is proof that this relationship benefits both shareholders and The Hormel Foundation.
Don’t wait if you want that 4%
If you are looking for 4% yields, you shouldn’t hold off too long here. Federal Realty and PepsiCo are right near that figure and could dip under with just a little upbeat news. You have more time with Hormel and Realty Income, but given that their yields are above 5%, you may want to lock in those income streams soon, too.
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Reuben Gregg Brewer has positions in Federal Realty Investment Trust, Hormel Foods, PepsiCo, and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
