2 Best Dividend Stocks to Buy Now and Hold Forever

Dividend investors are generally trying to create cash flow that can be used to supplement Social Security in retirement. It’s a worthy objective, but you have to be careful not to reach so far for yield that you open yourself up to the risk of dividend cuts. That’s why reliable dividend payers such as Federal Realty (FRT 1.23%) and Realty Income (O 0.34%) could be such valuable holdings.

Two attractive yields

The S&P 500 index (^GSPC +0.77%) has a miserly 1.1% yield today. The average real estate investment trust (REIT) yields 3.8%. Federal Realty is offering a 4.2% yield, with Realty Income’s yield coming in even higher, at nearly 5%. Basically, if you’re looking for yield, these two REITs have you covered.

Image source: Getty Images.

That said, they generate their dividends in slightly different ways. Federal Realty owns strip malls and mixed-use assets. It has a highly focused portfolio, with management taking a quality-over-quantity approach. It is always looking to redevelop assets and will happily sell properties that have reached their full potential, using the proceeds to buy assets in need of a little love. It is a repeatable model that has proven successful for decades.

Realty Income is a retail-focused net lease REIT that owns over 15,500 single-tenant properties. While it is trying to buy good assets, the business model is clearly focused on growth through acquisition. That said, the company’s size and financial strength generally afford it a low cost of capital. It has little problem finding accretive investments, though it is worth highlighting that the REIT has been expanding its reach in an effort to support growth. For example, a few years ago, it started to invest in Europe, and just recently, it made its first foray into Mexico. Debt investments and asset management operations are additional, and relatively new, developments.

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NYSE: O

Realty Income

Today’s Change

(-0.34%) $-0.23

Current Price

$66.45

Key Data Points

Market Cap

$61B

Day’s Range

$66.22 - $66.95

52wk Range

$50.71 - $67.15

Volume

243

Avg Vol

6.4M

Gross Margin

48.14%

Dividend Yield

4.85%

What about those dividends?

What really sets Federal Realty and Realty Income apart, however, is their dividend histories. Federal Realty has increased its dividend annually for 58 consecutive years, making it the only REIT that is also a Dividend King. While Realty Income’s 30 annual dividend increases aren’t as impressive, they are hard to complain about. That said, Realty Income’s focus on dividends is so intense that it actually trademarked the nickname “The Monthly Dividend Company.”

Attractive yields backed by attractive businesses that have produced impressive dividend records. What more could you ask for in a buy-and-hold dividend stock?