Unlocking Long-Term Wealth: 2 Income-Generating Stocks to Hold Forever
Investors seeking decades of passive income often focus on high-yielding stocks, but a high yield alone is not always a reliable indicator of a stock’s attractiveness. It’s essential to look beyond the yield and assess the underlying business. Two stocks that offer attractive yields and strong businesses are Realty Income (NYSE: O) and Toronto-Dominion Bank (NYSE: TD).
Realty Income: A Steady Eddie in the REIT Space
Realty Income, a real estate investment trust (REIT), boasts a 5.5% dividend yield, significantly higher than the REIT industry average of around 3.9%. This stalwart company has increased its dividend annually for 30 consecutive years and has an investment-grade rated balance sheet. With a diverse portfolio of over 15,400 properties across North America and Europe, Realty Income offers a stable source of income.
A Yield That’s Hard to Ignore
So, why is the yield so high? Realty Income’s slow and steady growth may not be exciting, but it’s precisely what makes it an attractive option for long-term investors. With a historical dividend growth rate of around 4%, the total return could reach around 9.5% per annum. This is particularly appealing when you consider that the dividend growth rate is above the historical inflation rate of around 3%.
Toronto-Dominion Bank: A Banking Giant with a High Yield
Toronto-Dominion Bank, commonly referred to as TD Bank, offers an attractive yield of around 5.2%, more than twice the average bank yield. This Canadian banking giant has a highly diversified business, an investment-grade rated balance sheet, and a long history of paying dividends, dating back to 1857.
A Temporary Setback Creates an Opportunity
TD Bank’s yield is near its highest level in over 30 years due to regulatory issues in the US. While this has led to a fine, added costs, and an asset cap, the bank remains financially strong, and its Canadian operations are unaffected. This temporary setback creates an opportunity for long-term investors to capitalize on the high yield.
Look Beyond the Yield
When searching for dividend stocks, it’s essential to look beyond the yield and focus on the underlying business. Realty Income and TD Bank offer high yields backed by strong businesses, making them attractive options for investors seeking decades of passive income. By taking a closer look at these two outsized yields, you may find that one or both will become a valuable addition to your portfolio.
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