Dividends have accounted for the lion's share of returns stock investors have received during the last several decades. Going back to 1960, a whopping 85% of the total returns of the S&P 500 can be attributed to reinvested dividends and the power of compounding.

Not all dividend payers are cut from the same cloth, however. A recent report by Hartford Funds showed that companies with payout ratios under 75% tend to perform better than dividend-paying peers with higher ratios.

The reason is simple: A higher ratio puts the dividend at risk of a cut or outright suspension, moves that tend to be followed by a sharp decline in share price.

Which dividend stocks stand out as top buys in today's market? PepsiCo (NASDAQ: PEP) and BlackRock (NYSE: BLK) are elite dividend payers with sub-75% payout ratios, above-average yields, and strong underlying fundamentals. Let's dive into why these two top dividend stocks deserve a spot in your portfolio.

PepsiCo: A titan in the snack and beverage industries

PepsiCo is a global powerhouse in the snack and beverage industries, dominating the $230 billion global savory snacks market with a 23% market share. Through iconic brands like Lay's, Cheetos, and Doritos, PepsiCo maintains its leadership in snacks while holding the position of the world's second-largest beverage provider behind Coca-Cola.

For dividend-focused investors, PepsiCo offers an attractive yield of 3.08% and has demonstrated consistent growth with a five-year dividend growth rate of 5.8%. While the company's payout ratio of 74.7% is on the higher side, its projected top-line growth of 4.3% in 2025 should help to lower its payout ratio.

PepsiCo's strength lies in its diverse portfolio of brands across carbonated soft drinks (CSD) and non-sparkling beverage categories, complemented by its in-house control of bottling operations. The company maintains a strong hold on the No. 2 position in the CSD market, with these fizzy beverages accounting for approximately half of PepsiCo's total beverage volume sold.

PepsiCo's investment appeal is bolstered by its high institutional ownership of 77.6% and reasonable valuation, with shares trading at 18.7 times 2026 projected earnings. This combination of strong institutional backing, value, market leadership, and consistent dividend growth makes it an attractive option for investors seeking income and capital appreciation.

BlackRock: The world's largest asset manager

BlackRock is the largest asset manager in the world, with $10.6 trillion in assets under management (AUM) at the end of June 2024 and clients in more than 100 countries. Product diversity and a heavier concentration in the institutional channel have traditionally provided BlackRock with a more stable set of assets than its industry peers.

BlackRock's well-diversified product mix makes it fairly agnostic to shifts among asset classes and investment strategies, limiting the impact that market swings or withdrawals from individual asset classes or investment styles can have on its AUM.

For dividend hunters, BlackRock offers a yield of 2.31%. Moreover, the company sports a conservative payout ratio of 50.1%, providing ample room for future increases. Best of all, BlackRock has demonstrated its commitment to shareholder returns with a blistering five-year dividend growth rate of 7%.

Looking ahead, BlackRock appears poised for growth. Analysts project an 11.5% increase in revenue for 2025. Despite this double-digit growth trajectory, shares currently trade at just 16.5 times 2026 projected earnings, suggesting an attractive entry point for long-term investors.

Like PepsiCo, BlackRock enjoys high institutional ownership at 81%, a testament to its perceived quality among professional investors.

Time to buy?

Both PepsiCo and BlackRock offer compelling cases for dividend-focused investors. These industry leaders sport sustainable payout ratios, consistent dividend growth histories, and strong market positions that should help them weather economic storms.

Moreover, both companies have demonstrated their ability to grow their dividends at a respectable clip over the past five years. As a result, PepsiCo and BlackRock warrant consideration by investors seeking a blend of current income and long-term growth potential.

Should you invest $1,000 in PepsiCo right now?

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George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2 Incredible Dividend Stocks to Load Up on Right Now was originally published by The Motley Fool