Two Amazing Dividend Stocks for Lifetime Holding
Key Points
Phillip Morris is shifting its focus towards reduced-risk tobacco products. Realty Income Corporation offers a strong exposure to America’s commercial real estate opportunities. There are 10 stocks that investors may prefer over Realty Income.
It can be exciting to bet on small, speculative growth stocks to make quick profits in the market. However, if you’re looking for peace of mind, it’s wise to consider well-established, dividend-paying companies that can provide a reliable income stream for years or even decades into the future.
Let’s take a closer look at why Realty Income Corporation (NYSE: O) and Phillip Morris International (NYSE: PM) could be excellent long-term investments.
Realty Income Corporation
Real estate is often considered one of the most dependable investments because everyone needs a place to live and do business, and the world isn’t creating new land—unless, of course, the Arctic melts. However, investing directly in real estate can be challenging due to issues like property taxes, repairs, and problematic tenants.
Real Estate Investment Trusts (REITs), such as Realty Income Corporation, allow investors to bypass these challenges while still benefiting from the potential upside of the real estate market.
The company maintains a diversified portfolio of commercial real estate assets, with a significant portion allocated to relatively stable industries such as grocery stores, dollar stores, and auto repair shops. These sectors tend to maintain consistent demand even during economic downturns, making the company’s operations somewhat recession-resistant—a major advantage in today’s uncertain economy.
Realty Income further enhances its stability through triple-net leases, where the tenant is responsible for property-level operating costs such as property taxes, insurance, and maintenance. This approach helps protect the company from inflation and ensures more predictable revenue streams over time.
With a forward price-to-earnings (P/E) multiple of 37, Realty Income trades at a significant premium compared to the S&P 500 average of 22. However, the company’s size and proven track record set it apart from smaller, less established alternatives. Additionally, Realty Income offers a market-leading dividend yield of 5.5%, which it has increased 131 times since its initial public offering (IPO) in 1994.
Phillip Morris International
It might be hard to believe now, but during the mid-20th century, the tobacco industry experienced explosive growth, similar to what we see in big tech today. While those days of rapid expansion have passed (largely due to regulations and growing health awareness), the industry remains highly profitable due to low costs, brand loyalty, and the addictive nature of nicotine.
Phillip Morris International is working to future-proof its business by aggressively transitioning to alternative nicotine products. As of the third quarter, smoke-free products accounted for 41% ($4.4 billion) of the company’s net revenue. This segment is driven by Iqos, its proprietary heated tobacco platform. The recent acquisition of Swedish Match has further strengthened Phillip Morris’s position in the smoke-free market and expanded its global distribution network, particularly in the U.S. market.
With a forward price-to-earnings (P/E) multiple of 18.8, Phillip Morris shares trade at a reasonable valuation, which is a key advantage for fundamentals-focused investors who want room for future growth. On the dividend front, the company stands out with a yield of 4.01%, significantly higher than the S&P 500 average of just 1.13%.
Don’t Underestimate Compounding Returns
It can be tempting to chase the next explosive stock that promises overnight wealth. However, volatility is typically a two-way street. Over the long term, the stock market has averaged an annual return of 10% despite ups and downs. With that in mind, investors can benefit from buy-and-hold stocks designed to withstand the test of time.
With annual dividend yields of 5.6% and 4%, Realty Income Corporation and Phillip Morris International bring you halfway toward the market’s average return, while also offering substantial potential for capital appreciation due to their stable, recession-resistant business models.
Should You Invest $1,000 in Realty Income Right Now?
Before purchasing stock in Realty Income, consider this:
The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to buy now—and Realty Income wasn’t among them. The 10 stocks that made the list could deliver significant returns in the coming years.
Consider when Netflix was added to the list on December 17, 2004. If you had invested $1,000 at the time of the recommendation, you would have $603,392 today. Or when Nvidia was added on April 15, 2005, your $1,000 investment would now be worth $1,241,236.
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