Dividends are an important part of a diversified portfolio. They provide value to investors even when the stock market is low, and they are a reliable source of passive income and stock price appreciation. Dividend stocks tend toward large, stable companies and provide certainty to protect your portfolio.
However, there may be other benefits. There is some evidence that dividend stocks can even outperform other stocks over time, like the proverbial slow-moving turtle versus growth stocks. Take the holding company of famous investor Warren Buffett, Berkshire Hathawaywhich is full of dividend stocks and has outperformed the S&P500 for many decades.
Start your morning smarter! Wake up with Breakfast news in your inbox every market day. Register for free »
The market is rising, by 26% this year, and has reached above-average valuations. Is that preparation for a fall? Can it keep climbing? No one knows, which is why it’s essential to own dividend stocks. Ally financially (NYSE: ALLY) And Real estate income (NYSE:O) are two top choices.
Ally is a small or perhaps medium-sized fish in the sea of US banks, but it is making a name for itself as it promotes its differentiated platform. It stands out in several key ways that bode well for its future and ability to capture market share. It can still break into the top ranks of US banks.
The first way it’s different is that it’s all online, and it’s the largest all-digital bank in the US. It has an impressive consumer account customer base of 3.3 million, and it has added retail deposit customers for 62 consecutive quarters, including 57,000 in the US. the third quarter.
Part of the way it’s been able to get to this point is that it already has a leading position as the nation’s largest auto lender. It started as the financial segment of General enginesand it already had a century-old, fully developed auto lending business when it was spun off in 2009. Car loans remain its core business and demand remains healthy despite the difficult interest rate environment. In the third quarter, the company had $9.4 billion in production.
Ally’s shares were under pressure and fell in September after it announced that defaults were worse than expected. The recent update was that car loan defaults are high at 2.24%, but strong risk management measures have been taken to reduce this. Ally’s shares rose after the election, as did most bank stocks, but are still super cheap, with a one-year price-to-earnings ratio of just 8 and a price-to-book value of 0.9. At this price, the dividend yields 3.2%, making this an excellent time to add this promising Buffett stock to your portfolio.
Realty Income is a real estate investment trust and perhaps the best one you can buy. It offers a mix of everything you could want in a dividend stock, such as high yield, growth and reliability. Oh, and it offers something that very few REITs or dividend stocks offer: a monthly payment.
Realty Income has paid dividends for 653 consecutive months and increased the dividend for 108 consecutive quarters. It yields a juicy 5.4% at the current price.
Moreover, what sets it apart is that it is safe and reliable for dividend growth. Not all REITs are reliable in their payouts or increases. The higher the return, the more likely there is some risk involved. Super high-yield REITs, which could pay 7% or even more, are often risky investments and trade in sectors such as mortgage-backed securities that are sensitive to economic factors.
Realty Income is a retail REIT with a diverse and therefore more secure tenant base, but overwhelmingly serves essential categories such as supermarkets and convenience stores with established, strong tenants such as Walmart And Lowe’s. Occupancy rates have rarely fallen below 98% in recent years, with the exception of the beginning of the pandemic, when many physical stores were not functioning.
Realty Income shares tumbled as the real estate sector felt the pressure of rising interest rates, but that only makes it an even better buy right now. Buy Realty Income stock for its dividend, not its ability to beat the market. It’s an all-weather stock that offers passive income and stability, and almost any time is a good time to buy shares.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Amazon: If you had invested $1,000 when we doubled in 2010, you would have $22,819!*
-
Apple: If you had invested $1,000 when we doubled in 2008, you would have $42,611!*
-
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $444,355!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns November 11, 2024
Ally is an advertising partner of Motley Fool Money. Jennifer Saibil has no positions in any of the stocks mentioned. The Motley Fool holds positions in and recommends Berkshire Hathaway and Realty Income. The Motley Fool recommends General Motors and Lowe’s Companies and recommends the following options: Long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
2 No-Brainer Dividend Stocks to Buy Now for Under $200 was originally published by The Motley Fool
