3 Dividend-Paying Growth Stocks to Double Down on This September

September's market turbulence creates prime buying opportunities—especially for growth stocks that actually pay you to hold them.

Dividend Growth Meets Capital Appreciation

These aren't your grandfather's income plays. We're targeting companies throwing off serious cash while expanding market share—the holy grail of total returns.

Cash Flow Machines With Expansion Plans

Forget stagnant value traps. These picks combine robust payout ratios with aggressive reinvestment strategies, funding growth while rewarding shareholders simultaneously.

Balancing Yield and Expansion

Too many investors chase yield like tourists chasing fads—and get burned when 'safe' dividends get cut. These selections maintain sustainable payouts while plowing capital into high-return projects.

Because nothing says 'financial wisdom' like trusting corporate boards to prioritize your dividend over their executive bonuses.

Image source: Getty Images.

1. Realty Income

Investors know(O 0.62%), which bills itself as the "monthly dividend company," for living up to that moniker. Not only has the real estate investment trust (REIT) maintained this trend since 1994, but it has also hiked its payout at least one time per year since then. At almost $3.23 per share annually, its current yield is about 5.4%.

It has funded those dividends by owning single-tenant, net-leased properties. This provides the company with a steady income as tenants cover the costs of maintenance, insurance, and property taxes. Currently, it has leased nearly 99% of the approximately 15,600 properties it owns.

Despite that success, interest rates ROSE early in the decade, leading to the stock selling at more than 25% below its all-time high. High rates have not slowed its profitability, as it earned $4.11 per share in funds from operations (FFO) income, a measure of a REIT's free cash flow. This means the stock trades at just 14 times its trailing FFO income.

Additionally, amid an economic slowdown, the Fed is finally poised to cut interest rates. This should allow the company to refinance existing debt and fund new property developments at a lower cost, possibly serving as the catalyst its stock needs to finally recover.

2. Target

(TGT -0.61%) has steadily trended downward since peaking in late 2021. It has lost nearly two-thirds of its value during that time as an uncertain economy, supply chain woes, and a series of controversial political stances led to fewer shoppers.

Moreover, the recent appointment of COO Michael Fiddelke as its next CEO drew a negative reaction from investors.

Despite a falling stock price, Target continued a pattern of annual payout hikes. With the streak now at 54 years, it is a Dividend King, a status that companies tend not to abandon unless necessary. That payout, which now amounts to $4.56 per share annually, yields more than 4.8%.

Fortunately, the $2.9 billion in free cash FLOW over the last year exceeded the approximately $2.0 billion spent to finance the dividend. Thus, Target can probably sustain its payout.

Additionally, the stock price likely factors in its challenges, especially considering that its P/E ratio of 11 is well below's 38 earnings multiple. As Target works through its challenges, it will pay investors well to hold the stock as it works to get back on track.

3. PepsiCo

Beverage and food giant(PEP 0.98%) is another consumer dividend stalwart that has struggled. In addition to its flagship beverage, it owns hundreds of brands. These include Mountain Dew, Aquafina, Frito-Lay, and Quaker.

Health-conscious consumers are purchasing fewer sugary beverages and packaged foods, which has weighed on the stock. Consequently, the stock has lost about 25% of its value over the last two years.

However, like Target, PepsiCo is a Dividend King, having maintained a 53-year streak of increases. Its yearly payout of $5.69 per share yields about 3.75%. It generated nearly $7.1 billion in free cash Flow over the last year, just shy of the $7.5 billion spent on dividend costs. Still, its $8.0 billion in liquidity should cover the payout while it works to improve its free cash flow.

Moreover, its free cash flow does not include a $1.86 billion impairment of intangible assets. That one-time charge helped raise its P/E ratio to 27. Still, its forward P/E ratio, which does not include such charges, is at 18, implying this is a reasonably priced stock.

Ultimately, new PepsiCo investors can buy a solid, generous income stream cheaply as the company reinvigorates its product lines. Such efforts should help the stock recover, making it a likely growth and income play.