Exploring Financial Horizons: Two Timeless Dividend Stocks to Savor
Stock market investing can be a tense journey to grow your wealth. However, investing in established companies that consistently deliver dividends can offer some welcome tranquility due to their record of stability and profitability. Let's delve into why Realty Income Corporation (O -0.42%) and Dollar General (DG -1.45%) could be valuable additions to your long-term investment portfolio.
Realty Income Corporation
Realty Income Corporation, a real estate investment trust (REIT), is a unique type of company that returns most of its profits to shareholders, thereby reaping tax advantages. With an impressive annualized return of 10.8% between 1992 and 2017, REITs have outperformed both stocks and bonds, making them a tempting choice for long-term investors.
Realty Income distinguishes itself by concentrating on high-quality commercial tenants, often in industries less prone to economic downturns, such as dollar stores and grocery stores. The company boasts an impressive 98.7% occupancy rate, punctuated by a diverse portfolio covering various parts of the United States and Western Europe, notably the United Kingdom, where it thrives with notable tenants like Sainsbury's.
Realty Income's dividend yield stands at an impressive 5.63%, surpassing the S&P 500 average of 1.3%. Remarkably, this dividend has been incremented for 26 consecutive years. The recent Federal Reserve interest rate peak presents an excellent opportunity to stake a claim on Realty Income. With costs of capital falling more easily, the company can better acquire new real estate assets and raise capital. Decreasing rates can also result in REIT dividends becoming more attractive relative to other asset classes, thereby potentially pushing their prices higher.
Dollar General
Despite its shares registering a 42% decline this year, Dollar General stock looks like a "falling knife" akin to Buffett's famous investment advice. However, as he also famously said, sometimes it pays to be greedy when others are fearful. The company's recent performance issues have opened up opportunities for patient investors to bet on a high-yield growth stock positioned for a rebound.
Controversially, Dollar General's revenue figures, far from plummeting, have actually increased. Q3 sales recorded a 5% rise year-over-year, reaching $10.2 billion, while same-store sales saw a slight 1.3% uptick. The company further extended its store count to 20,523 with the opening of 617 new locations. While Q3 profits took a dip by 25.3%, this primarily stemmed from financially constrained consumers spending less on pricier items.
The soaring inflation over the last two years has hit low-income consumers more significantly than average Americans. However, investors can look forward to challenges easing in the long term as costs moderate. Case in point, the Consumer Price Index saw an October decrease to 2.6%.
Investors will be pleased to discover Dollar General's stock price declines have made its 2.9% dividend yield particularly enticing for non-REIT companies managing to distribute just roughly 40% of their profits. Moreover, the payout has been raised for seven consecutive years, indicating this pattern should persist.
Choosing the Right Dividend Stock
Both Realty Income and Dollar General could be promising additions to a long-term portfolio. However, they are tailored for different investment approaches. Realty Income is more focused on consistent income, even paying dividends in monthly installments. Dollar General, on the other hand, presents a growth-oriented option, with its 2.9% yield observed as noteworthy, but stock price appreciation likely serving as the primary contributor to its long-term returns.
After observing the outstanding performance of Realty Income Corporation, it becomes clear that investing in established companies with consistent dividends, such as REITs, can provide financial stability and growth. With a focus on high-quality commercial tenants and an impressive track record of dividend increases for 26 consecutive years, Realty Income is an attractive option for long-term investors seeking stable income.
Despite Dollar General's recent stock price decrease, the company's resilience in the face of inflation and its history of raising dividends for seven consecutive years make it an appealing choice for investors looking to capitalize on growth opportunities in the retail sector. By considering their respective investment approaches and financial goals, investors can strategically decide whether Realty Income or Dollar General would be a more suitable addition to their portfolio.
