5 Best DRIP Stocks To Own

In this article, we discuss 5 best DRIP stocks to own. If you want to read our detailed analysis of dividend reinvestments and their returns over the years, go directly to read  12 Best DRIP Stocks To Own.

5. PepsiCo, Inc. (NASDAQ:PEP)

Dividend Yield as of January 16: 2.62%

PepsiCo, Inc. (NASDAQ:PEP) is a multinational food, snack, and beverage company that specializes in the marketing, production, and manufacturing of its products. In the third quarter of 2022, the company reported revenue of $22 billion, up 8.8% from the same period last year. Its organic revenue also grew by 16% from the prior-year quarter. The company expects to pay $6.2 billion to shareholders in dividends in FY22.

PepsiCo, Inc. (NASDAQ:PEP) has been raising its dividends for the past 50 years consistently. It offers $1.15 per share in quarterly dividends and has a dividend yield of 2.62%, as of January 16. The company is among the best DRIP stocks to own because of its strong dividend policies.

In December, Argus raised its price target on PepsiCo, Inc. (NASDAQ:PEP) to $206 with a Buy rating on the shares, appreciating the company’s valuable brand portfolio and solid growth.

The number of hedge funds holding investments in PepsiCo, Inc. (NASDAQ:PEP) grew to 72 in Q3 2022, from 65 in the previous quarter. The stakes owned by these hedge funds have a total value of over $4.8 billion. Fundsmith LLP was the company’s leading stakeholder in Q3.

Lindsell Train mentioned PEP in its Q3 2022 investor letter. Here is what the firm has to say:

“At this point, it may help to give a further example of these self-reinforcing moats to illustrate the idea, drawing from the consumer franchises side of our portfolio. In our view, strong consumer brands can similarly exhibit Lindycompatible anti-ageing properties. Consider, that the longer a company invests in its brands through advertising and R&D, the stronger and more resonant they may get. When successful, a self-sustaining feedback loop is established, whereby it becomes ever harder to recreate a heritage-rich brand from scratch, raising barriers to entry, and proportionately increasing its likely lifespan. There are plenty of long-lived portfolio franchises I could reference here, but I’ve gone with PepsiCo (NYSE:PEP); partly because we have good time-series stats on it (beware data bias!) but also, as I hope will become evident, because Pepsi over its 129 years has succeeded in creating some wonderfully deep moats.

With Pepsi Cola you get the flagship soft drinks brand, which is both global and generational, but you also get the Frito-Lay salty snacks portfolio assembled alongside it, claiming nearly 40% of the global market. That’s ten-times greater than the nearest competitor and likely higher than the next 65 competitors combined. These are exceptionally strong global bands with market shares to match; the long-term empirical result being Pepsi’s dividend record which over the past 66 years (as far back as we’ve been able to go) has compounded at an annualised rate of 10%. Pepsi is no ‘in at the ground floor’ start-up today, but it wasn’t six decades ago either. Early growth investor Philip Fisher put it well when in 1958 (two years into Pepsi’s current winning streak) he wrote of “companies which in spite of outstanding prospects of major further growth are so financially strong, with roots going so deep into the economic soil, that they qualify under the general classification of ‘institutional stocks’”. PepsiCo fits this description well…” (Click here to see the full text)

4. The Coca-Cola Company (NYSE:KO)

Dividend Yield as of January 16: 2.87%

The Coca-Cola Company (NYSE:KO) offers an Automatic Dividend Reinvestment Service that allows the shareholders to have full rights and privileges on the reinvested shares. The company has been making regular dividend payments to shareholders since 1920 while raising its payouts for the past 60 years. It currently pays a quarterly dividend of $0.44 per share and has a dividend yield of 2.87%, as of January 16. The company is among the best DRIP stocks to own.

Deutsche Bank raised its price target on The Coca-Cola Company (NYSE:KO) to $62 in December but maintained a Hold rating on the shares. The firm highlighted the company’s positive developments in 2022.

As of the end of Q3 2022, 59 hedge funds in Insider Monkey’s database owned stakes in The Coca-Cola Company (NYSE:KO), with a collective value of $25 billion.

Rowan Street Capital mentioned The Coca-Cola Company (NYSE:KO) in its Q4 2022 investor letter. Here is what the firm has to say:

“Let’s take The Coca-Cola Company (NYSE:KO) for example. Its dividend yield is 2.8%, earnings are estimated to grow at only 3.6% rate per year over next 4 years, and its earnings multiple is currently at 24x (based on next years forecasted earnings). KO has an anemic growth, so we can argue that paying 24x earnings is not very attractive. Let’s assume that the multiple will stay constant over the next 3-5 years, thus our expected annual returns will be 2.8%+3.6% = 6.4% (that is below the current reported inflation rate and only slightly above the risk-free rate of 4%).”

3. Exxon Mobil Corporation (NYSE:XOM)

Dividend Yield as of January 16: 3.22%

Exxon Mobil Corporation (NYSE:XOM) is another one of the best DRIP stocks on our list. The company deals in the distribution of natural gas. In January, Mizuho assumed its coverage on the stock with a Buy rating and a $140 price target, up from $90. The firm identified the stock as a Top Pick in the sector for 2023.

Exxon Mobil Corporation (NYSE:XOM) has been raising its dividends consistently for the past 40 years and has paid dividends to shareholders for over 100 years in a row. The company pays a quarterly dividend of $0.91 per share for a dividend yield of 3.22%, as recorded on January 16.

As of the close of Q3 2022, 75 hedge funds tracked by Insider Monkey owned stakes in Exxon Mobil Corporation (NYSE:XOM), up from 72 in the previous quarter. The collective value of these stakes is $5.5 billion. Rajiv Jain’s GQG Partners was the company’s leading stakeholder in Q3.

2. Realty Income Corporation (NYSE:O)

Dividend Yield as of January 16: 4.51%

Realty Income Corporation (NYSE:O) is a California-based real estate investment trust company that pays monthly dividends to shareholders. In the third quarter of 2022, the company reported a strong cash position with $187.7 million available in cash and cash equivalents and $2.5 billion in liquidity. The company’s revenue for the quarter came in at $837.3 million, which saw a 70.9% growth from the same period last year.

Realty Income Corporation’s (NYSE:O) DRIP policy provides cost-effective methods to invest in the company’s common stocks, which makes it one of the best DRIP stocks to own. The company holds a long 28-year streak of dividend growth. It pays a monthly dividend of $0.2485 per share and has a dividend yield of 4.51%, as of January 16.

The number of hedge funds tracked by Insider Monkey owning stakes in Realty Income Corporation (NYSE:O) grew to 28 in Q3 2022, from 19 in the previous quarter. These stakes are valued at $422.5 million collectively.

1. 3M Company (NYSE:MMM)

Dividend Yield as of January 16: 4.60%

3M Company (NYSE:MMM) is a Minnesota-based multinational conglomerate that operates in the sectors of industry, healthcare, and consumer goods. The company’s reinvestment plan allows its shareholders to have their cash dividends automatically reinvested to purchase shares of 3M stock. It maintains a 64-year streak of dividend growth and pays a quarterly dividend of $1.64 per share. The stock’s dividend yield on January 16 came in at 4.60%. Due to its strong dividend plans, the company is one of the best DRIP stocks to own.

In Q3 2022, 3M Company (NYSE:MMM) reported strong performance with an operating cash flow of $1.5 billion and a free cash flow of $1.4 billion. Its cash generation was enough for its dividend payments and share repurchases of $1 billion during the quarter.

At the end of Q3 2022, 49 hedge funds tracked by Insider Monkey reported owning stakes in 3M Company (NYSE:MMM), down from 54 in the previous quarter. The consolidated value of these stakes is over $1.45 billion.

Mayar Capital mentioned 3M Company (NYSE:MMM) in its Q2 2022 investor letter. Here is what the firm has to say:

“We also bought back into 3M (NYSE:MMM) as the stock reached attractive levels. We’d sold our shares in 3M last year when the price exceeded our estimated fair value, and as better opportunities to invest in presented themselves at the time. Nonetheless, we’ve always liked this business with its diversified revenues, its R&D leadership and its stable margins.

You can also take a look at 12 Best Up-and-Coming Stocks To Buy and 11 Best All-Time Low Stocks To Buy

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