Realty Income and Phillip Morris can deliver steady income for decades to come.
Nothing is quite as satisfying as getting a nice chunk of passive income in your account every quarter. That’s why dividend stocks are a favorite of long-term investors who want stable and consistent returns in the stock market.
Read on to find out why Realty Income (O 0.39%) and Phillip Morris International (PM 0.10%) could be two great picks to buy and hold forever.
1. Realty Income
Nicknamed “the monthly dividend company” because it distributes its dividends 12 times per year instead of four, Realty Income belongs on your investment radar. The real estate investment trust (REIT)Â boasts a yield of 5.13%, compared to the S&P 500 average of 1.32%. A portfolio of quality, diversified clients helps the company ensure stable distributions.
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Realty Income specializes in the types of businesses that can perform well, no matter what happens in the economy. Its top three industries are grocery stores, convenience stores, and dollar stores. And with analysts at J.P. Morgan Chase estimating a 35% recession probability before the end of 2024, it makes sense for investors to position themselves defensively.
If Reality Income has any obvious weakness, it’s the company’s size. With a market cap of $54 billion, it’s the seventh largest REIT in the world. And sheer scale could make it harder to find enough new properties to move the needle while maintaining strict quality standards. That said, the world is a big place, and international expansion could be a long-term opportunity.
Right now, Realty Income gets around 11.2% of its annual rent from the U.K. Investors should expect Europe to become an increasingly important part of the company’s business over the coming decades.
2. Phillip Morris International
The tobacco industry has long been a favorite of defensive, income-focused investors. After all, it sells a habit-forming product that many consumers will buy, no matter what’s happening in the world.
Unfortunately, tobacco’s health effects have brought a host of ethical and regulatory challenges that can impact shareholder returns.
Phillip Morris International sees the writing on the wall. Instead of simply squeezing profits out of its combustible cigarette business, the company has pivoted to alternative products like Iqos that are designed to heat tobacco instead of burning it.
Second-quarter net revenue jumped 9.6% to $9.5 billion, driven by volume increases in heated tobacco products like Iqos (up 13.1% to 33.5 billion units) and oral nicotine products (up 20% to 4.2 billion). The new products are also boosting the company’s margins. The smoke-free segment boasted a gross profit of 22.2%, compared to just 5.5% for combustibles.
Like Realty Income, Phillip Morris’ management focuses on returning profits to shareholders. The company boasts a dividend yield of 4.47% and has increased its payout for 15 years in a row. While the company has historically also done share repurchases, it has suspended them until at least 2026 to focus on reducing debt after the $16 billion acquisition of Swedish Match (maker of Zyn nicotine pouches) in 2022.
Which stock is best for you?
Realty Income and Phillip Morris International are both excellent long-term buys. But they serve slightly different investment strategies.
Realty Income boasts a larger dividend yield and an arguably safer business model because it doesn’t have to worry about changing health regulations. However, Phillip Morris looks likely to generate more stock-price appreciation as it shifts to higher margin alternative products.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Will Ebiefung has positions in Realty Income. The Motley Fool has positions in and recommends JPMorgan Chase and Realty Income. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.