The S&P 500 has experienced a remarkable year, with a 21% increase since the beginning of January. While this substantial growth is certainly noteworthy, it's important to recognize that not all stocks have shared in this success. Companies like PepsiCo (NASDAQ: PEP) have seen their stock prices remain relatively stagnant, and Alexandria Real Estate Equities (NYSE: ARE) has witnessed a 10% decline. Despite these setbacks, these downturns present an opportunity for long-term investors, particularly those seeking dividend income, to enter the market at a potentially advantageous point. These companies boast robust business models, and investors can benefit from their dividends while they wait for the stock prices to recover. Let's delve into the reasons why you might want to consider adding these stocks to your portfolio.

PepsiCo

PepsiCo, a household name, manufactures a diverse range of beverages, snacks, and convenience foods under popular brands such as Pepsi, Gatorade, Doritos, Quaker Chewy, and Rice-A-Roni. These products continue to be well-received by both consumers and retailers. However, recent revenue growth has been somewhat sluggish. In the third quarter, which ended on September 7th, the company's adjusted revenue—excluding factors like foreign currency exchange rates—increased by a modest 1.3%. This growth was primarily driven by price hikes, which contributed 3 percentage points, while volume detracted 2 percentage points. As a result, the stock price has significantly lagged behind the broader market.

It's unlikely that this is due to a widespread consumer aversion to PepsiCo's offerings. Evidence suggests that other consumer product companies, such as McDonald's, are also experiencing weaker performance due to consumers feeling the pinch of economic pressures. As inflationary pressures begin to subside, it's anticipated that consumers will return to their regular purchasing habits, which should provide a boost for PepsiCo.

In the interim, the company's management has been diligent in managing expenses, resulting in a 5% increase in adjusted earnings per share during the third quarter. For patient investors, the opportunity to receive dividends offers a silver lining while they await an acceleration in top-line growth. Encouragingly, the board of directors recently raised the quarterly dividend payment by 7%, marking 52 consecutive years of increases—a testament to the stock's status as a Dividend King. With an annual payout of $5.42, the stock boasts a 3.2% dividend yield, which is significantly higher than the S&P 500's average of 1.3%.

Alexandria Real Estate Equities

Alexandria Real Estate Equities, a real estate investment trust (REIT), specializes in owning office properties. The company's stock performance this year has been less than stellar, with a double-digit percentage decline. The office sector has faced challenges, not least of which is the rise in remote work following the COVID-19 pandemic. However, Alexandria's unique position in the market, with tenants that are likely to provide stable rent payments and cash flow, sets it apart.

The company leases properties to life sciences companies in major research hubs such as New York, Boston, San Francisco, Seattle, and the Research Triangle in North Carolina. Its tenants include large pharmaceutical corporations, life science product and service providers, and public biotechnology firms. These entities typically require in-person work and collaboration to maximize their effectiveness, as scientists need access to expensive lab equipment that is not easily portable.

This is reflected in the company's occupancy rate, which stood at 94.6% in the second quarter. Alexandria's adjusted funds from operations (FFO), a crucial cash flow metric for REITs, was $2.36 per share in the most recent quarter, marking a 5.4% increase from the previous year. The company's management anticipates an adjusted FFO per share of $9.41 to $9.53 for the year, an improvement from the $8.97 reported in 2023.

Alexandria has a history of increasing dividends over the years. Most recently, the company raised its quarterly payout from $1.27 to $1.30, effective from July. The stock's dividend yield stands at 4.5%, which is competitive compared to other REITs. As of September, the FTSE Nareit All Equity Index had a yield of 3.6%.