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3 Dividend Stocks to Buy for Passive Income

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·4 min read
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  • Dividend stocks can offer stability and income to investors when times are tough.

  • Realty Income (O) — One of the most consistent dividend stocks out there and it pays out monthly.

  • Home Depot (HD) — Despite a sell-off in the stock, this leading home improvement retailer is focused on the dividend.

  • Federal Realty (FRT) — Considered to be the blue-chip leader in the REIT space, it has raised its dividend for more than 50 consecutive years.

stock market ticker screen with the word "dividends" appearing in large text
stock market ticker screen with the word "dividends" appearing in large text

Source: iQoncept/shutterstock.com

A well-diversified investor should love dividend stocks. Not because they are boring or safe or anything else. But because high-quality dividends are generally indicative of well-run businesses with stable cash flow. They are not fly-by-night, flash-in-the-pan growth stocks. Nor do they tend to be as volatile during times of uncertainty. Lastly, because solid dividend stocks tend to be of high quality, the stocks do well when the bull market eventually returns.

However, diversity is key.

Investors don’t want to be so focused on dividend stocks that they miss the long-term opportunities in companies like Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG). Further, during many points of the last 10 years, growth and tech stocks were powerful performers. With many of these names in the toilet though, dividend investors are feeling a bit of comfort — even though they are down too.

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During times of trouble, dividend stocks can help keep portfolios out of trouble during the tough times. Anchoring a portfolio with high-quality businesses is a great strategy. It’s also what allows those patient investors to go after some of the big-hitters, like the Apples and Googles of the world.

Let’s look at these three dividend stocks for passive investors seeking some income and portfolio balance.

O

Realty Income Corporation

$65.39

HD

The Home Depot Inc.

$289.69

FRT

Federal Realty Investment Trust

$112.77

Realty Income Corporation (O)

a businessperson holds an imaginary blueprint of a house
a businessperson holds an imaginary blueprint of a house

Source: Shutterstock

One of the top dividend stocks out there — and one that I have loved owning over the years — is Realty Income (NYSE:O). The company is a REIT operator and has a dominant position in the commercial real estate space.

Investors love this one because the company pays its dividend monthly, not quarterly. However, that doesn’t mean it’s slow to increase its payout.

O stock is one for the dividend aristocrats list. It has raised its dividend in 98 consecutive quarters. That’s four times per year for more than 24 years. Further, Realty Income has paid a dividend in 621 consecutive months. That’s more than 50 years! This is the type of consistently that investors crave when they are looking for dividend stocks to buy.

That all said, Realty Income stock is not immune to the recent market swoons. Shares are down more than 12% over the last few weeks and still remain almost 20% below the high. While that’s better than a lot of other stocks, it’s still a tough pill to swallow.

A 4.5% dividend yield certainly helps though.

The Home Depot Inc. (HD)

Here's Why Home Depot Stock is Worth Buying Over Retailing Rival Lowe's
Here's Why Home Depot Stock is Worth Buying Over Retailing Rival Lowe's

Source: Mihai_Andritoiu / Shutterstock.com

Many investors look at Home Depot (NYSE:HD) as just a home improvement play. In some respect, they are correct. However, the company has made several items on the agenda a real focus. Specifically, Home Depot has really put its resources into growing two things: The dividend and its e-commerce business.

While HD stock yields just 2.6%, the company continues to increase its payout. Home Depot has boosted its dividend for 13 straight years, while sporting a five-year growth rate of more than 18%. Imagine getting that kind of raise at work. Further, the company has paid a dividend for 140 consecutive quarters (that’s 35 years).

Due to the progress by Amazon (NASDAQ:AMZN), Home Depot knew it was important to bolster its e-commerce platform. The billions that Home Depot has invested is paying off. In the recent quarter, management said: “Our focus on delivering a frictionless, interconnected shopping experience is resonating with our customers as approximately 50% of our online orders were fulfilled through our stores in fiscal 2021.”

Although estimates call for modest growth for the year, Home Depot is approaching its busiest quarter of the year as the spring season is underway.

Federal Realty Investment Trust (FRT)

an apartment complex displayed during daytime
an apartment complex displayed during daytime

Source: Anders Jildén via Unsplash

Last but not least we have the bluest of blue-chip dividend stocks in the REIT space. Federal Realty has consistently delivered for its shareholders and currently pays a yield of 3.75%. That’s a darn-good yield for something so consistent.

According to the company, “With over half a century of dividend increases year after year, we hold the single longest annual dividend growth record among all REITs.”

FRT stock give an investor exposure to top-tier real estate and premium properties that have allowed the company to diversify its holdings and bolster its portfolio. REIT investments aren’t for everyone necessarily. However, investors that are looking for dividend stocks should consider some of these investment vehicles.

The ability to charge and raise rents while investing in new properties can be a lucrative proposition for long-term shareholders.

On the date of publication, Bret Kenwell held a long position in O. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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