1 Magnificent S&P 500 High-Yield Dividend Stock Down 25% to Buy and Hold Forever

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Reuben Gregg Brewer, The Motley Fool

Sat, Mar 15, 2025, 3:05 PM 5 min read

If you are the benignant of capitalist who likes to bargain and clasp stocks forever, you person to usage a antithetic acceptable of rules. Simply picking the highest yielding stocks disconnected a list, similar the companies successful the S&P 500 index, won't do. You request to purpose higher, looking for high-yield dividend stocks that you tin number connected and, amended yet, trying to bargain them erstwhile they are connected sale. That is the nonstop accidental that exists contiguous with this landlord, which is inactive trading astir 25% beneath wherever it was anterior to the coronavirus pandemic.

Realty Income (NYSE: O) is 1 of the largest internationally diversified existent property concern trusts (REITs) you tin buy. It uses a nett lease approach, which means that its tenants are liable for astir property-level expenses for the buildings they occupy. Often nett lease deals are financing arrangements for the tenant, which sells the spot to rise currency portion inactive maintaining effectual power implicit the plus due to the fact that of the lease structure. Realty Income, which tends to person advantaged entree to superior markets, makes the quality betwixt its outgo of superior and the rent it collects.

A idiosyncratic successful furniture sleeping with a timepiece successful the foreground.

It's beauteous adjacent to a win-win for some the purchaser (Realty Income) and the seller (which becomes Realty Income's tenant). And due to the fact that the REIT operation was created to walk income connected to shareholders successful a taxation advantaged mode (avoiding corporate-level taxation), investors get to benefit, arsenic well. In the lawsuit of Realty Income, the dividend output is simply a precise charismatic 5.5% close now. By comparison, the output connected the S&P 500 scale is simply a miserly 1.2%. The mean REIT's output is lone 3.6%.

But a lofty output isn't each determination is to similar astir Realty Income's dividend. That's due to the fact that the dividend is backed by an unthinkable way grounds of yearly increases. That streak is 30 years agelong astatine this point, with an mean annualized complaint of summation of 4.4% implicit the span. But wrong that 30 years is different streak, with 110 consecutive quarterly increases. On apical of that, the dividend is paid monthly, which makes owning this REIT beauteous adjacent to a paycheck replacement.

There are a batch of nett lease REITs you could buy, but Realty Income stands isolated from the battalion successful galore ways. For starters, it is precise large, with a marketplace headdress of astir $50 billion. Its adjacent closet adjacent has a marketplace headdress of conscionable $14 billion. Realty Income's size helps make its enhanced entree to capital, since it attracts much involvement erstwhile it issues banal and bonds (having an concern people rated equilibrium expanse helps connected the enslaved front, too). Also notable connected the size beforehand is the REIT's monolithic 15,600-building portfolio. That creates a immense magnitude of diversification.