If you’re retired or nearing retirement, you’re probably considering generating passive income to supplement your Social Security checks. You just want to make sure you find stocks that are worth buying now and holding for the long term. And that’s exactly what you’re likely to find Agree Real Estate (NYSE:ADC) And Bank of Nova Scotia (NYSE:BNS). Here’s what you need to know about these two buy-and-hold stocks.
1. Agree Realty is growing tremendously
Dividend investors looking at Agree Realty might look at its dividend payment history and notice that the dividend was cut in 2011. So don’t throw the shares in the dump; it is a very different stock today than it was back then. To put a number on that, when Agree cut the dividend, the company owned fewer than 100 properties. The bankruptcy of one of the tenants was a major problem at that time and made a dividend cut necessary. By the end of the first quarter of 2024, Agree owned a portfolio of more than 2,100 properties. No tenant or property is nearly as important as it was when the company cut its dividend.
But there is a second issue to consider. This real estate investment trust (REIT) has grown tremendously over the past decade. And that growth has translated into a significant increase in dividend payments, with a compound annual growth rate of around 6% per year over the past decade. That’s quite attractive for a REIT and comes from a stock with a dividend yield of almost 4.9%. The S&P500 index yields less than 1.3%. A substantial return, roughly a decade of dividend growth and an attractive dividend growth rate. Not a bad combination.
So the real question is: how long is Agree’s growth trajectory? That’s difficult to answer, but a comparison with a colleague can help. Accord’s biggest competitor, Real estate income, owns more than 15,400 properties. Simply put, it seems that Agree is far from done increasing the size of its portfolio and probably the dividend as well.
2. Scotiabank has been paying dividends since 1833
Bank of Nova Scotia, better known as Scotiabank, has been paying dividends without interruption for more than 150 years. There’s no reason to think this series is about to end. The dividend yield currently stands at a very attractive 6.7%, which is about double the average for a bank. You might think there’s something wrong here, and you’re right. Scotiabank is performing less well than its peers and is currently renewing its portfolio.
Scotiabank originates from Canada, but unlike most major Canadian banks, has chosen to skip the US market and expand into South America. It didn’t work out as well as hoped and now management is refocusing on the most profitable countries (such as Mexico) and considering exiting the least profitable countries (such as Colombia). It will likely take a few years for the company to turn things around and investors switch to other banks.
But that’s the opportunity for investors who think in decades and not days. You can earn huge returns from a company with a long track record of reliably rewarding investors with dividends. To be fair, the dividend may not grow much, if at all, for a while. That’s not great, but the starting dividend yield of 6.7% is fair compensation while you wait for the turnaround to occur. You can also take some extra comfort in knowing that heavily regulated Canadian banks like Scotiabank have government-protected market positions in Canada and tend to operate in a very conservative manner in their businesses.
Retirees need reliable dividend stocks
If you’re retired or nearing retirement, you can’t afford to just buy any old dividend stock. You need stocks that have enough resources to keep paying you decades into the future. Agree’s growth opportunities are enormous and that should translate into reliable dividend growth for shareholders. Scotiabank’s yield is high, but its incredible dividend record suggests the turnaround it is undertaking will end well for yield seekers.
Take the time to get to know these two high-yield companies and one, if not both, could find a place in your portfolio today.
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Reuben Gregg Brewer has positions in Bank Of Nova Scotia and Realty Income. The Motley Fool holds positions in and recommends Realty Income. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.
Do you want passive income for decades? 2 Stocks to Buy Now and Hold Forever was originally published by The Motley Fool
