The stock market is near record highs, but there are still some opportunities to be found, especially for income investors. There are some excellent dividend stocks that are trading for significant discounts to their recent highs, and they could have big tailwinds as the falling-rate environment continues.
While there are dozens of great dividend stocks you can buy right now, here are three that look like especially compelling opportunities.
Massive scale advantages
Prologis (PLD -1.54%) isn't just the largest industrial real estate investment trust (REIT); it's the largest real estate stock of any kind. The company owns a portfolio that consists of 1.2 billion square feet of industrial real estate located on four continents.
Prologis owns "logistics" properties such as warehouses and distribution centers. Amazon (NASDAQ: AMZN) is a top tenant, and FedEx (NYSE: FDX), Home Depot (NYSE: HD), and UPS (NYSE: UPS) are also among the top 10.
There are a few reasons why income investors should consider Prologis today. For one, the company's massive scale and rock-solid balance sheet give it some major cost advantages over rivals. Second, although Prologis is massive, the logistics real estate industry has long-term growth tailwinds due to the steady growth in e-commerce, plus the company is starting to get into the high-potential data center industry. And finally, the company has a great track record of growing its profits (and dividend), keeping occupancy high and allocating capital wisely.
A great income stock no matter what the economy is doing
Realty Income (O -0.77%) was the first REIT I bought years ago, and it remains one of my largest investments to this day.
If you aren't familiar, Realty Income owns more than 15,000 freestanding properties, mostly occupied by retail tenants. But don't let the word "retail" scare you; the company focuses on the types of retail that are recession-resistant and not too prone to e-commerce disruption. Just to name a few examples, top tenants include Dollar General (NYSE: DG), Wynn Resorts (NASDAQ: WYNN), and FedEx.
Realty Income still has lots of room to scale its business and estimates its addressable net-lease real estate market opportunity at $14 trillion globally. It's been a publicly traded REIT for 30 years, and during that time has generated a 14.1% annualized return and has grown its dividend for 108 consecutive quarters. As of this writing, Realty Income has a 5.5% dividend yield, which it pays in monthly installments.
A highly profitable bank stock with room to grow
Ally Financial (ALLY -1.00%) isn't exactly the best-known bank stock, but it belongs on the radar of income investors with at least a moderate level of risk tolerance.
Ally is primarily an auto lender, having been spun off from General Motors (NYSE: GM) in the wake of the financial crisis. However, it has evolved into an impressive online bank, offering high-yield savings accounts, CDs, checking accounts, brokerage accounts, and other lending products.
Because of its focus on auto lending, Ally is a highly profitable business. Its average newly originated auto loan has a yield of 10.5%, and the bank has a retail auto net charge-off rate of 2.24% as of the third quarter. With a roughly 4.2% deposit cost that should gradually come down as the Federal Reserve lowers interest rates, Ally could be an especially big beneficiary of the falling-rate environment that is widely expected to persist for at least the next few years.
Great long-term income investments
To be clear, I'm saying that all three of these are excellent ways to put money to work for the long term. I own all three in my own stock portfolio and have absolutely no idea what they'll do over the coming weeks or months, but I'm quite confident that I'll be very glad I bought them years from now.
