2 Dividend Stocks to Buy and Hold Forever

Long-term investing is one of the keys to earning sustainable returns in the stock market. And dividend stocks can help maximize your gains by providing consistent passive income potentially for a lifetime. Let's discuss some reasons why Realty Income (O -1.02%) and Dollar General (DG -0.30%) are good enough to buy and hold for the long haul.

Realty Income

Founded in 1969, Realty Income is one of America's best-known real estate investment trusts (REITs) -- a type of company that receives tax benefits for returning most profits to shareholders via dividends. The company stands out because of its size, stability, and consistent returns.

Realty Income's business model involves buying commercial properties, renting them out to tenants, and distributing the income to shareholders. It boasts a diversified portfolio of relatively safe clients like dollar stores, pharmacies, and automotive services, which can be expected to continue paying their leases, even in bad economic conditions.

While the company is already the seventh-largest REIT in the world, it continues to expand by buying new properties and merging with smaller rivals, such as Spirit Realty, which was acquired for $9.3 billion in early 2024. International expansion is another significant growth opportunity, and Realty Income has made a significant push into the U.K., which now represents almost 12% of its portfolio.

With a dividend yield of 5.5%, Realty Income trounces the S&P 500's average of 1.27%. It is also a Dividend Aristocrat®, a group of S&P 500 companies that have increased their annual dividends in each of the past 25 consecutive years. (The term Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC.)

Dollar General

Consumer staples companies sell essential goods like food, personal care products, and supplies. People tend to buy these things even when the economy is weak, making them an excellent pick for investors who prioritize safety and longevity. As a dollar store chain, Dollar General fits snugly into this category.

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But while Dollar General has historically been resistant to recessions, inflation has been a uniquely challenging problem because of how hard it hits the company's core low-income customers. While they still visit dollar stores, they are more likely to spring for low-margin consumables instead of bigger ticket home goods, hurting the company's profitability.

Shares have fallen by around 48% over the last 12 months, presenting an opportunity to buy the dip. With a forward price-to-earnings (P/E) multiple of just 13.5, Dollar General shares have become very oversold compared to alternatives like Walmart, which boasts a forward P/E of 35.

U.S. inflation is cooling, and Dollar General looks capable of growing out of its current challenges. Management expects to open a whopping 575 new U.S. stores in 2025 (the company currently has a little over 20,000 locations) while remodeling its existing stores to improve traffic and customer satisfaction. Meanwhile, with a payout ratio of just 39%, Dollar General's dividend (yielding 2.88%) looks safe for the long haul.

Which stock is best for you?

Realty Income and Dollar General are both excellent picks for long-term dividend investors because of their above-average yields and relatively defensive business models. With its much higher yield and longer track record, Realty Income is better for investors who prioritize passive income. Dollar General likely offers more growth potential as it recovers from near-term challenges and continues to expand its store footprint.