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2 Dividend Stocks to Buy Right Now and Hold Forever | The Motley Fool

2 Dividend Stocks to Buy Right Now and Hold Forever

In the ever-volatile world of investing, finding stocks that can provide steady income while weathering market storms is akin to discovering hidden treasures. Dividend stocks, particularly those with a proven track record of consistent payouts and growth, offer investors a reliable path to building long-term wealth. These aren't the flashy growth stocks that dominate headlines with meteoric rises and falls; instead, they are the quiet workhorses of portfolios, delivering compounding returns through dividends that can be reinvested or used as passive income. Today, we're diving into two exceptional dividend stocks that stand out for their resilience, strong fundamentals, and potential to be held indefinitely. These picks are based on their histories of dividend reliability, competitive advantages in their industries, and forward-looking growth prospects. Whether you're a seasoned investor or just starting to build a dividend-focused portfolio, these companies exemplify the "buy and hold forever" philosophy popularized by investing legends like Warren Buffett.

Let's start with the first stock: Procter & Gamble (PG). This consumer goods giant has been a staple in American households for over 180 years, producing everyday essentials like Tide detergent, Pampers diapers, Gillette razors, and Crest toothpaste. What makes Procter & Gamble a dividend powerhouse? For starters, it boasts an impressive streak as a Dividend King, having increased its dividend payments for 68 consecutive years as of 2024. This isn't just a fluke; it's a testament to the company's ability to generate consistent cash flow through economic cycles, including recessions, pandemics, and inflationary periods.

Procter & Gamble's business model is built on a foundation of strong brands that command pricing power and customer loyalty. In a world where consumers might cut back on luxury items during tough times, they still need to brush their teeth, wash their clothes, and care for their families. This defensive nature shields PG from severe downturns. Financially, the company reported robust earnings in its most recent fiscal year, with net sales exceeding $80 billion and a healthy operating margin around 24%. Its dividend yield currently hovers around 2.5%, which might not seem eye-popping compared to high-yield plays, but the real magic lies in its growth. Over the past decade, PG has grown its dividend at an average annual rate of about 5%, outpacing inflation and providing investors with a growing income stream.

Looking ahead, Procter & Gamble is well-positioned for the future. The company is investing heavily in innovation, such as sustainable packaging and health-focused products, aligning with global trends toward environmental responsibility and wellness. Its expansion into emerging markets, where populations are growing and middle classes are expanding, offers untapped growth potential. For instance, in Asia and Africa, PG is capturing market share by tailoring products to local needs, like affordable hygiene solutions. Analysts project steady earnings growth of 6-8% annually over the next five years, supported by share buybacks that enhance shareholder value. Of course, no stock is without risks—supply chain disruptions or intense competition from private-label brands could pose challenges—but PG's diversified portfolio and global reach mitigate these effectively.

Why hold Procter & Gamble forever? It's the epitome of a "set it and forget it" investment. Reinvesting dividends through a DRIP (Dividend Reinvestment Plan) can lead to exponential growth over decades. Imagine buying shares today and watching your initial investment multiply as the company continues to dominate its sector. Historical data shows that from 1980 to now, PG has delivered total returns (including dividends) that have outperformed the S&P 500 in many periods, all while providing peace of mind during market crashes.

Now, shifting gears to our second recommendation: Realty Income (O). Known as "The Monthly Dividend Company," Realty Income is a real estate investment trust (REIT) that specializes in single-tenant commercial properties leased to essential retailers like Walgreens, Dollar General, and 7-Eleven. What sets Realty Income apart in the dividend arena is its commitment to monthly payouts, a rarity that appeals to income-focused investors seeking regular cash flow. As of 2024, it has raised its dividend for 29 consecutive years, earning Dividend Aristocrat status, with a current yield around 5.5%—significantly higher than many blue-chip stocks.

Realty Income's appeal lies in its triple-net lease structure, where tenants cover property taxes, insurance, and maintenance, minimizing operational risks for the REIT. This model generates predictable rental income, much like clockwork. The company's portfolio is diversified across 49 states and includes over 13,000 properties, with a focus on recession-resistant tenants in the retail, industrial, and gaming sectors. During the COVID-19 pandemic, while many REITs struggled, Realty Income maintained a high occupancy rate above 98% and even continued dividend increases, proving its resilience.

Financially, Realty Income is in solid shape. It reported funds from operations (FFO)—a key metric for REITs—of about $4 per share in the latest quarter, supporting its dividend comfortably with a payout ratio under 75%. The company has been aggressive in acquisitions, recently expanding into Europe and data centers, which could drive future growth. With interest rates potentially stabilizing, Realty Income stands to benefit from lower borrowing costs for property purchases. Analysts forecast annual FFO growth of 4-6% over the next few years, fueled by rent escalations and strategic expansions.

One of the most compelling reasons to buy and hold Realty Income forever is its role in portfolio diversification. Real estate exposure through a REIT like this provides a hedge against stock market volatility and inflation, as rents often rise with living costs. Over the long term, the compounding effect of monthly dividends can be transformative. For example, an investor who bought shares in the 1990s would have seen their yield on cost soar to double digits today, thanks to consistent hikes. Risks include sensitivity to interest rate changes (higher rates can pressure REIT valuations) and economic slowdowns affecting tenants, but Realty Income's conservative debt levels (debt-to-EBITDA around 5x) and focus on creditworthy lessees offer protection.

In conclusion, both Procter & Gamble and Realty Income embody the principles of timeless investing: strong moats, reliable dividends, and the ability to compound wealth over generations. In an era of market uncertainty, with geopolitical tensions, inflation concerns, and technological disruptions, these stocks provide stability and income. Buying them now, while valuations are reasonable (PG trades at a forward P/E of about 24, and O at around 14 times FFO), positions you for long-term success. Remember, the "hold forever" strategy isn't about timing the market but about time in the market. By focusing on quality dividend payers like these, investors can sleep well at night, knowing their portfolios are built on solid foundations. Whether you're planning for retirement, funding a child's education, or simply seeking financial independence, these two stocks deserve a spot in your forever portfolio. As always, conduct your own due diligence, but the data and history speak volumes—these aren't just stocks; they're legacies in the making.

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