Insights

3 Dividend Stocks You Can Safely Hold for Decades

When the market heads toward the bear, investors tend to look for safe stocks that they can set and forget. That’s a good strategy, and you only need to take a look at how growth stocks have been faring over the past few months to see that play out in reality.

Dividend stocks are often some of the safest stocks you’ll find. They’re typically mature and established with demonstrated capabilities to grow. They also provide income. Coca-Cola (NYSE: KO), Realty Income (NYSE: O), and Home Depot (NYSE: HD) are three of the best dividend stocks to hold forever.

More dominant than ever and still growing

Coca-Cola has emerged from the pandemic as a more efficient, better-focused company, and it’s stronger than ever. The pandemic exposed its vulnerable away-from-home category, and it met the challenge by strengthening its unparalleled distribution system and stepping up its at-home category. Now that the stay-at-home phase has mostly passed, the company is seeing volume increases across the board and rising sales despite inflation.

Perhaps the biggest change the company made during the pandemic was slashing its brand assortment from 400 to 200. Don’t worry, you won’t see the demise of your favorite drinks. Most of the 200 labels that got cut were small, local names that diverted resources from the core beverages that make up the vast majority of sales. They accounted for less than 2% of volume and even less of sales. That gives the company more leverage to innovate within its top brands and see higher returns on investments.

Within its new strategy, Coca-Cola has 1,500 initiatives set up for 2022, and it’s ramping up its data collection and usage to identify top opportunities. For one thing, the soft-drink giant is expanding its digital program and direct-to-consumer platform, and says it has only a 6% share in developing markets, which account for 80% of the global population. As massive as Coke seems, it’s not taking its dominant position for granted and sees huge ways to grow.

Coca-Cola is one of the safest dividend stocks on the market, having raised its dividend annually for 60 years, including when sales were declining at the beginning of the pandemic. Its dividend yields just under 3% at the current price, which is slightly below its average. That’s because the stock price has gained as investors recognize the stock’s resilience.

Steady monthly dividends

Realty Income isn’t the highest-yielding real estate investment trust (REIT) you can buy, but it might be the safest. Its yield is far from shabby — 4.6% at the current price  — and it’s increased its dividend for 99 consecutive quarters. What’s most unique about Realty Income is that it pays a dividend monthly, which translates into monthly income for shareholders.

The company is a retail REIT, which means it owns properties that it leases to retailers. In Realty Income’s case, it’s a super-secure investment because it leases to well-established essentials retailers and it has long-term leases with these companies. Its top-five tenants are Walgreens, 7-Eleven, Dollar General, Dollar Tree, and FedEx. Grocery stores make up more than 10% of its tenants, with convenience stores another 9%. Its occupancy rates have held near 100% for the past 30 years, and its leases have a weighted average of nearly nine years remaining.

Realty Income operates a triple net lease model, which means it’s not responsible for daily operations on the property. Tenants get a better deal because they’re responsible for more, but Realty Income benefits by freeing up its resources for core activities, and tenants typically sign long-term agreements (usually more than 10 years) for generous terms.

Realty Income is one of the largest REITs in the world with more than 11,000 properties — and still growing. It’s a no-brainer REIT to own for secure and high-yielding dividends.

Where America goes for home improvement

Home Depot remains the top destination for home improvement, and despite outsized growth in the early stages of the pandemic, it has continued to post increases in comparative-stores sales (or comps) every quarter since. So far, it’s performing better than expected in 2022, and it raised its full-year guidance after the first quarter.

It’s the largest U.S. home retailing chain by store count with more than 2,300 locations across the U.S., Canada, and Mexico. First-quarter sales came in at a record $39 billion, a 3.8% year-over-year increase, and earnings per share were $4.09, a 6% increase over last year despite inflation and rising costs. 

Part of its success has been due to its embrace of digital and its investments in its digital capabilities over the past few years. The company revamped its e-commerce program prior to the pandemic, which created short-term pressure and wasn’t popular with investors. But that proved to be a prescient move which opened up the floodgates when customers stayed at home.

Over the past two years, it’s also upped its distribution capabilities, better placing it to handle shipping and delivery even as the supply chain choked up. These are all reasons why the company is poised to keep the system flowing and manage customer demand in an environment that’s still pressured.

Home Depot stock gained 73% over the past five years, outperforming the S&P 500. It also pays a dividend that yields 2.8%,  and investors can expect more gains and dividend increases for years to come.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FedEx and Home Depot. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.

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