It takes something special for a company to be worthy of a lifetime commitment.
Like dividends? Even if your priority is growth -- or capital appreciation -- most investors' portfolios benefit from the occasional cash bump. If nothing else, you can use this money to purchase more growth stocks!
It's not like finding dividend stocks is a major challenge either. There are dozens of solid dividend payers most investors can name off the top of their heads. And you'll find hundreds more great dividend stocks with just a little more digging.
A dividend stock you can feel good about owning forever, however, is a slightly different story. A true "forever" holding is a company that's capable of adapting as needed so it can continue making its dividend payments, or a leading company in a business that is steady and dependable.
If you've got a few thousand bucks you're looking to allocate toward income-producing investments, here's a rundown of three great dividend payers you can be comfortable buying and holding forever.
Realty Income
Plenty of companies are capable of driving recurring cash flows that fund dividend payments. Take Coca-Cola as an example. Consumers tend to buy their favorite beverages over and over again. Every time they do, Coca-Cola pockets a few pennies. If you're looking for the world's most reliable cash cow business though, you won't do much better than rental real estate.
Enter Realty Income(O 0.06%). It's a real estate investment trust, or REIT. Just as the name suggests, these are companies that own revenue-bearing properties ranging from office buildings to hotels to apartments to warehouses. Most of any rent-driven profits produced by these organizations are passed along to a REIT's shareholders.
Even by REIT standards, however, Realty Income is notable. It specializes in retail space. Top tenants include Dollar General, Walmart, and Walgreens, although no single tenant accounts for more than 4% of its total rent revenue.
It seems risky on the surface. After all, the entire retail industry appears to be struggling to fend off the impact of online shopping. Retailing industry research outfit CoreSight suggests 3,200 U.S. stores have already closed their doors for good this year.
Dig deeper, though. Most of Realty Income's top tenants have staying power, or at least an incentive to remain in place once they've invested the time and money in setting up shop in a particular location. That's why this REIT's most recent occupancy rate is still above 98% despite these trying times.
This is also how this real estate investment trust's not only been able to make a dividend payment every month (yes, every month) for the past 647 months, but also raise its monthly dividend every quarter for the past 107 quarters. Newcomers will be plugging in while the trailing dividend yield stands at just under 5.8%.
JPMorgan Chase
JPMorgan Chase(JPM 1.04%) isn't paying as much. Indeed, with its current dividend yield of only 2.3%, JPMorgan Chase isn't even paying half as much as Realty Income is.
What the nation's biggest bank (as measured by total assets) lacks in current yield, though, it more than makes up for in dividend growth. Its trailing-12-month payout of $4.40 per share is about 3 times more than its annualized payout from just 10 years back.
Investors keeping close tabs on JPMorgan lately may have some concerns. Shares tumbled following April's release of its first-quarter results, which included disappointing guidance for the remainder of the year. Namely, the big bank's net interest income outlook for 2024 remains right around $90 billion, versus expectations for an increase of between $2 billion and $3 billion.
Losses on soured loans are also on the rise. It's uncomfortably similar to the red flags waving in the wake of 2008's subprime mortgage meltdown, which ultimately forced JPMorgan Chase to dramatically cut its dividend.
There's a distinct difference between then and now, though. Then, nobody thought what happened was even a possibility, leaving the world unprepared for when it did. Now, there are safeguards in place meant to prevent a lending market meltdown from ever happening again.
Also bear in mind that everything working against the banking business this time is cyclical. The industry has seen and survived high interest rates, rising defaults, and dried-up demand for investment banking and wealth management before. It will do so again. Any weakness from these stocks during such rough patches are usually a prime buying opportunity.
If nothing else, the fact that JPMorgan shares are holding up as well as they are despite the gloomy backdrop tells you something about its foreseeable future. As long as there's money, the world's going to need banking services.
Hercules Capital
Last but not least, add Hercules Capital (HTGC -0.05%) to your list of dividend stocks to buy and hold forever while it's yielding just a little over 8%.
Hercules belongs to a category of investments known as business development companies, or BDCs. These organizations provide capital to up-and-coming outfits that may not qualify for a conventional bank loan but may also not yet be ready to go public.
Sometimes this money is offered in exchange for equity in the borrowing company although in most cases it's supplied in the form of a loan. And, given the riskier nature of these loans, they're usually made at above-market rates. Hercules reports its effective portfolio yield at this time is right around 14%.
Hercules Capital's shareholders don't collect all of this effective yield for themselves, of course. The BDC's got its own expenses to pay, and obviously some of its borrowers may be struggling to service their loans. Nevertheless, Hercules shareholders are enjoying above-average yields that reflect the degree of risk they're taking on themselves.
But maybe there's not even as much risk here as there seems to be on the surface. Hercules Capital is a specialist, focusing on life sciences, technology, renewables, and software. Not only are these industries among the market's highest-growth businesses, but Hercules' expertise in these fields provides an edge for its borrowers as well as for Hercules shareholders.
Underscoring the value of this specialization is the fact that of the 650-plus companies Hercules has funded and the 1,000-plus that it has co-funded, more than 250 of them have either ended up going public or being acquired.
The kicker: Hercules hasn't failed to pay a dividend in any quarter since going public back in the middle of 2005. It seems unlikely the streak's going to be broken anytime soon, if ever.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Realty Income, and Walmart. The Motley Fool has a disclosure policy.
