If you’re looking for passive income from your investment portfolio, dividend stocks are for you. These companies pay out a share of their earnings to investors, usually quarterly but sometimes monthly. According to a study from Hartford Funds, companies that consistently increase their annual dividends tend to outperform those that don’t, with lower volatility along the way. If this sounds appealing to you, here are three blue-chip dividend stocks to buy and hold for the long haul.
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1. Realty Income: 31 years of dividend increases
Realty Income (O +0.52%) is a massive real estate investment trust (REIT) built for dividend investors. What makes REITs attractive is that they are legally required to pay out 90% of their annual taxable income to shareholders. Realty Income pays a monthly dividend to shareholders and has maintained a long track record of increasing its dividend every year since 1994.
Today’s Change
(0.52%) $0.31
Current Price
$60.55
Key Data Points
Market Cap
$56B
Day’s Range
$60.26 – $61.04
52wk Range
$55.86 – $67.94
Volume
164K
Avg Vol
5.9M
Gross Margin
50.46%
Dividend Yield
5.34%
Realty Income owns a portfolio of 15,500 commercial properties spread across the United States and Europe. It leases these properties to tenants under long-term triple net lease (NNN) agreements. These leases shift much of the operating costs, such as maintenance, insurance, and real estate taxes, onto their tenants, while Realty Income benefits from lower operating costs and smoother earnings over time.
The biggest risks for investors buying Realty Income include higher interest rates and economic downturns that could affect tenants’ ability to meet lease obligations. To mitigate some of these risks, Realty Income has an institutional-grade tenant base that includes Dollar General, Dollar Tree, FedEx, 7-Eleven, and Walgreens; no single tenant accounts for more than 3.3% of its annualized base rent.
At recent prices, Realty Income had a 5.4% dividend yield. While a high yield may be attractive, it can also be a sign the market doesn’t think the company can sustain its current payout. In the first quarter, Realty Income’s dividend distributions came to nearly 72% of its adjusted funds from operations (which is what REITs use instead of net income), a level the company has shown over time that it can easily afford.
Realty Income has done an excellent job of navigating various economic and market environments over 31 years of dividend increases, making it a dividend stock to hold for the long haul.
2. S&P Global: 53 years of dividend increases
For over 53 years, S&P Global (SPGI 0.90%) has increased its annual dividend payments to investors, placing it in the exclusive group of Dividend Kings, or companies that have raised their payout annually for 50 years or more. While it may not have the most eye-catching yield, around 0.9%, that’s in part because its stock has climbed so high — about 280% over the past decade. Lately, the stock has gotten caught up in the selling of software-related stocks, but investors shouldn’t let that distract them from S&P Global’s robust competitive advantages and resilient business.
Today’s Change
(-0.90%) $-3.68
Current Price
$407.24
Key Data Points
Market Cap
$121B
Day’s Range
$403.22 – $411.66
52wk Range
$381.61 – $579.05
Volume
68.7K
Avg Vol
2M
Gross Margin
62.88%
Dividend Yield
0.95%
What makes S&P Global stand out is its role in the global credit ratings market, where it holds a dominant 50% market share in an industry with high barriers to entry. It also boasts a strong market position in benchmarks and data analytics, which generate high-margin, recurring software subscription fees through its Market Intelligence and Indices divisions, supporting its capital-light business model.
Today, S&P Global stock is priced at around 22 times its forward earnings and is near its cheapest valuation in almost four years. The company will also spin off its Mobility division, giving shareholders one share of Mobility Global for every one share of S&P Global held as of June 15. If you’re looking for a high-quality stock at a good valuation and a track record of consistently rewarding income investors, S&P Global is another solid choice.
3. Aflac: 44 years of dividend increases
Aflac (AFL +0.94%) provides supplementary insurance across the United States and Japan. Primarily operating as a specialty insurer, Aflac focuses on accident, cancer, and critical illness policies, positioning itself outside the traditional property and casualty insurance space. At recent prices, the stock yields about 2.1%.
Today’s Change
(0.94%) $1.08
Current Price
$116.55
Key Data Points
Market Cap
$59B
Day’s Range
$115.43 – $117.72
52wk Range
$96.95 – $119.81
Volume
4M
Avg Vol
2.5M
Dividend Yield
2.04%
Aflac leverages its entrenched payroll-deduction distribution networks, which create a sticky customer base that generates recurring premium revenues. On top of this, its business model has enabled it to accumulate a massive, low-cost investment float, which it invests in interest-bearing assets such as U.S. Treasuries and corporate bonds to generate additional investment income.
The company has rolled out some new products, including a hybrid term life policy with a long-term care rider, a response to an aging population and rising inflation, that allows policyholders to use coverage for care. It is also seeing strong growth in Japan across its medical, cancer, and life insurance offerings, which drove first-quarter growth.
Aflac’s steady business has enabled it to raise its annual dividend for 44 consecutive years, illustrating the company’s long-term commitment to rewarding shareholders.
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