Finding Best Income Stocks When Market Yields Fall Short

For investors focused on generating passive returns, the current market environment presents a real challenge. The S&P 500’s 1.1% dividend yield leaves significant room for improvement compared to the traditional 4% withdrawal rule many retirees rely on. However, the solution isn’t to abandon income investing—it’s to dig deeper and identify best income stocks that still deliver meaningful distributions. Three compelling candidates stand out: PepsiCo, Realty Income, and Enterprise Products Partners, each offering dramatically higher yields ranging from 4% to 6.7%.

Understanding the Income Opportunity

The gap between the broader market’s paltry 1.1% and what quality income stocks can deliver is substantial. PepsiCo currently offers a 4% yield, Realty Income delivers 5.4%, and Enterprise Products Partners provides an impressive 6.7% distribution rate. This meaningful spread reflects the opportunity available to investors willing to research beyond headline indices. Rather than settling for minimal returns, income-focused investors can access best income stocks across different sectors and structures—each with distinct characteristics worth understanding.

PepsiCo: Recovery Story Among Best Income Stocks

Among these three best income stocks, PepsiCo currently offers the most interesting turnaround narrative. The company has faced headwinds typical of the consumer staples sector, including pricing pressures from cost-conscious consumers and the ongoing shift toward healthier consumption patterns. The stock has declined approximately 25% from its 2022 peak, creating what many view as a potential recovery opportunity.

What distinguishes PepsiCo from struggling peers is its pedigree as a Dividend King—a status requiring 50+ consecutive years of dividend increases. Achieving this milestone demands operational excellence through both prosperous and challenging periods. Management is currently implementing strategic initiatives including brand acquisitions aligned with emerging consumer preferences and engagement with activist investors to enhance operational efficiency. If historical patterns hold, this recovery phase may reward patient investors while they collect the stock’s robust 4% yield during the transition.

Realty Income: The Steady Foundation for Income Investors

For those seeking a more predictable income component among best income stocks, Realty Income presents a distinctly different profile. This real estate investment trust has demonstrated remarkable consistency through 30 consecutive years of dividend increases and maintains an investment-grade credit rating—both valuable indicators of financial stability.

Realty Income dominates the net lease REIT category with a portfolio exceeding 15,500 properties worldwide. In the REIT sector, scale combined with strong credit metrics creates competitive advantages. The REIT structure mandates that at least 90% of taxable income be distributed to shareholders, limiting capital available for internal property acquisitions. Instead, REITs access growth capital through debt and equity offerings. Realty Income’s size and financial strength typically provide preferential access to capital markets at lower costs, translating to better terms when acquiring new properties. The trade-off is predictably slower growth as larger entities require proportionally more capital investment to expand. For conservative income-focused investors, the 5.4% distribution yield likely outweighs moderate growth constraints.

Enterprise Products Partners: Overlooked Opportunity in High-Yield Income Stocks

The highest yield among these best income stocks doesn’t automatically signal the highest risk—a nuance many investors overlook. Enterprise Products Partners exemplifies this principle through 27 consecutive years of annual distribution increases, essentially mirroring its entire public history as a master limited partnership. Like Realty Income, it maintains investment-grade credit ratings.

Enterprise’s competitive moat stems from its business model as one of North America’s largest midstream energy infrastructure operators. Rather than profiting from commodity price speculation, the company charges usage fees for its pipeline network transporting oil and natural gas. This fee-based structure insulates financial performance from energy price volatility. Steady demand for energy infrastructure remains robust even during industry downturns, providing the primary revenue driver. The 6.7% distribution yield reflects this reliability. One consideration: the MLP structure adds tax complexity requiring K-1 forms at filing time. For investors comfortable with slightly more sophisticated tax documentation, this high-yield opportunity warrants serious consideration among best income stocks available today.

Selecting Your Best Income Stocks Strategy

Each option addresses different investor priorities within the income stocks category. PepsiCo appeals to those with higher risk tolerance seeking a potential recovery narrative while collecting meaningful distributions. Realty Income serves as a portfolio anchor for conservative income investors desiring steady, predictable returns. Enterprise Products Partners offers compelling high-yield potential for investors who understand midstream energy infrastructure and can navigate the MLP structure.

The distinction between mediocre returns and genuinely compelling income stocks often hinges on patience and research. Rather than accepting the market’s 1.1% standard, investors focusing on these best income stocks can construct portfolios delivering 4-6% yields while maintaining credible business fundamentals and demonstrated dividend commitment.

Stock Advisor returns as of January 18, 2026.