For investors who want their portfolio to work for them, income stocks offer one of the most reliable tools available. These are stocks that pay regular dividends, providing a steady stream of cash simply for holding shares. That income can cover expenses, be reinvested to compound returns over time, or both.
An income stock is any stock that pays a relatively reliable dividend—a regular cash distribution drawn from company profits. Most companies pay dividends quarterly, though some pay annually, semi-annually, or monthly. The return is expressed as a dividend yield, calculated by dividing the annual dividend payment by the share price. A stock paying $1 annually and trading at $20 has a 5% dividend yield.
The best income stocks do more than just pay dividends. They grow them consistently over time. A company increasing its dividend by 10% annually doubles its payout in just over seven years. Rising dividends tend to push share prices higher as well, giving income investors both passive cash flow and capital appreciation.
Income stocks also tend to be less volatile than growth stocks, making them stabilizing forces in portfolios. While growth stocks often trade at premium valuations and deliver returns primarily through price appreciation, income stocks provide current cash flow alongside more modest capital gains. This combination appeals particularly to retirees or investors seeking lower-risk investments that generate regular income.
Three stocks demonstrate different approaches to income investing, each with distinct yield profiles, dividend growth characteristics, and financial strength supporting their distributions.
Realty Income Corporation (O) has been a dependable income stock over the years, currently trading around $67. The real estate investment trust delivered its 113th consecutive quarter of dividend increases in early 2026 and has boosted its payout 133 times since its initial public offering in 1994. This record of more than 30 years of dividend growth places it in the elite Dividend Aristocrats category.
The REIT yielded around 5% in early 2026—substantially higher than the S&P 500’s dividend yield of less than 1.2%. But what truly distinguishes Realty Income is its monthly dividend payment structure. While most companies pay quarterly, Realty Income distributes cash to shareholders twelve times per year, providing more frequent income that some investors prefer for budgeting purposes or cash flow management.
Realty Income focuses on buying essential retail properties including home improvement stores, grocery stores, and convenience stores, along with industrial real estate and other properties like data centers and gaming facilities. It triple-net leases the freestanding properties to high-quality tenants, making them responsible for building insurance, maintenance, and real estate taxes. This structure provides Realty Income with very stable income that isn’t eroded by operating expenses.
The REIT’s business model creates predictable cash flows that support consistent dividend growth. It steadily acquires new income-producing properties, which should allow the trust to continue increasing its monthly dividend. The essential nature of many tenants—grocers, home improvement retailers, convenience stores—provides defensive characteristics as these businesses tend to maintain operations regardless of economic conditions.
For investors seeking current income at a 5% yield with a track record of consistent increases and monthly payment frequency, Realty Income offers a compelling combination. The triple-net lease structure and focus on essential retail provide stability, while the steady property acquisition strategy creates growth.
Verizon Communications Inc. (VZ) offers an even higher yield than Realty Income, currently trading around $49 with a dividend yield approaching 6% in early 2026. The telecom giant’s mobile and broadband customers provide a reliable base of revenue and cash flow that supports this substantial distribution.
Verizon expects to generate over $21.5 billion of free cash flow after funding capital expenditures in 2026—a 7% increase from 2025’s level. This cash flow will easily cover the expected annual dividend outlay of around $11.5 billion, providing a comfortable margin of safety. The company generates nearly double the cash flow needed to fund its dividend, leaving room for dividend growth while maintaining financial flexibility for network investments.
Verizon has increased its dividend for 19 straight years, the longest current streak in the U.S. telecom sector. While this doesn’t qualify for Dividend Aristocrat status (which requires 25 years), it demonstrates management commitment to returning cash to shareholders through multiple business cycles and technological transitions.
The telecom industry provides natural income stock characteristics. Wireless and broadband services generate recurring revenue from subscription-based customers. Network infrastructure requires ongoing capital investment, but once deployed, it produces cash flows for years. Competitive dynamics have stabilized as the industry consolidated to three major national carriers, reducing the price wars that pressured profitability in earlier periods.
Verizon’s 6% yield is particularly attractive in the current environment where the S&P 500 yields just 1.2%. For investors seeking maximum current income, Verizon offers one of the highest yields among large-cap stocks with investment-grade credit ratings. The 19-year dividend growth streak provides confidence that management prioritizes distributions, while the strong free cash flow coverage ensures sustainability.
PepsiCo Inc. (PEP) represents the gold standard of dividend growth, currently trading around $168 with a dividend yield around 3.5% in early 2026. While this yield is lower than Realty Income’s 5% or Verizon’s 6%, PepsiCo offers something neither can match—Dividend King status.
PepsiCo delivered its 54th consecutive annual dividend increase in early 2026, keeping it in the elite group of Dividend Kings. These are companies with 50 or more years of consecutive dividend increases, a feat requiring exceptional business resilience and management discipline through multiple recessions, market crashes, and competitive challenges.
The beverage and snacking giant’s 3.5% yield is still nearly triple the S&P 500’s dividend yield of less than 1.2%, providing meaningful current income. But the real attraction is the combination of current yield and future growth potential. PepsiCo’s long-term goal is to grow earnings per share at a high single-digit annual rate. With earnings rising and a strong balance sheet, PepsiCo should have plenty of capacity to continue pushing its payout higher.
PepsiCo’s business model creates the stability necessary for decades of dividend growth. The company’s portfolio spans beverages (Pepsi, Mountain Dew, Gatorade, Tropicana) and snacks (Frito-Lay, Quaker, Doritos, Cheetos). These are everyday consumer products with pricing power, brand loyalty, and global distribution. Economic downturns may cause consumers to trade down to cheaper alternatives, but they don’t stop buying snacks and beverages entirely.
The company’s financial strength supports its dividend. PepsiCo maintains investment-grade credit ratings, generates substantial free cash flow, and has demonstrated ability to grow through acquisitions and organic innovation. This combination of financial strength, brand power, and global scale creates confidence that PepsiCo can continue its dividend growth streak for years to come.
For investors prioritizing dividend growth over maximum current yield, PepsiCo offers an established track record. The 54-year streak demonstrates that management has navigated every economic challenge since the early 1970s without cutting the dividend. The high single-digit earnings growth target suggests future dividend increases should continue at healthy rates.
These three stocks represent different points on the income investing spectrum. Verizon offers the highest current yield at nearly 6%, appealing to investors maximizing immediate cash flow. Realty Income provides a 5% yield with monthly payments and the longest dividend increase streak at 133 consecutive raises. PepsiCo delivers a 3.5% yield backed by 54 years of increases and Dividend King status.
The choice depends on individual priorities. Investors in or near retirement seeking maximum current income might favor Verizon’s 6% yield. Those wanting frequent payment dates for cash flow management could prefer Realty Income’s monthly distributions. Investors focused on long-term dividend growth and total return might choose PepsiCo’s Dividend King pedigree and high single-digit earnings growth target.
Income stocks tend to be most common in real estate, energy, financials, consumer staples, utilities, and telecommunications—sectors with stable cash flows and mature business models. These companies typically trade at lower valuations than growth stocks and offer modest price appreciation potential. The trade-off is regular dividend income that growth stocks rarely provide.
Building a diversified income portfolio involves spreading investments across multiple companies and industries to reduce the impact of any single company cutting or suspending its dividend. Combining a REIT like Realty Income with a telecom like Verizon and a consumer staples company like PepsiCo creates exposure to different business models and economic drivers while maintaining focus on income generation.
The goal is constructing a portfolio that generates enough reliable cash flow to meet needs while providing some growth to offset inflation over time. All three of these stocks demonstrate the financial strength, business stability, and management commitment necessary to support sustainable dividend programs.
