Dividend Aristocrat stocks are great for holding your portfolio together, in good times and bad times. Their underlying businesses have hiked dividend payouts for 25 consecutive years or more. Companies can’t keep their dividends increasing for a quarter of a century through luck alone. As such, these businesses are as sturdy as they come.
You only need a handful of them to be very successful. Hold them for the next few decades, and you’ll find a snowballing portfolio that can significantly outperform the broader market. Selling these dividend stocks is not a wise idea, as it will reset the process and you’ll miss fat dividend payments that would’ve otherwise been almost guaranteed.
Here are three such Dividend Aristocrat stocks you shouldn’t sell unless absolutely necessary:
Realty Income (O)
Realty Income (NYSE:O | O Price Prediction) is the most reliable monthly-paying dividend stock you can buy. The underlying business is a real estate investment trust (REIT) with a portfolio of mainly retail customers. This portfolio has never disappointed, even during recessions.
Realty Income’s customers themselves are stable and recession-resistant. Management prioritizes stability and only onboards tenants whose businesses aren’t shaky. This has allowed it to ride through 2008 with an occupancy rate of 97%.
The business is now growing dividend payments and expanding into Europe. The stock pays monthly, and the yield is quite fat at 5.3%. Dividend payments are comfortably covered by earnings, and interest rate cuts will make the stock more attractive while boosting the broader REIT sector.
If you bought O stock exactly 25 years ago and reinvested dividends, the overall return would today be 1,016.33%. That’s compared to 288.3% if you invested in the SPY and held for the same period.
PepsiCo (PEP)
Admittedly, PepsiCo (NASDAQ:PEP) hasn’t done the best in recent years. The stock has declined 28.3% from its May 2023 peak and is down 17.3% in the past year. PEP stock has been on a very stable trajectory up until 2023 and was comfortably beating the market, so the recent decline is a surprise to many.
Investors blame GLP-1 drugs (like Ozempic) for causing a decline in how customers perceive PepsiCo’s sugary products. And while this is true, the impact is quite overstated and is likely temporary. The company has long maintained its dominance in the snacking industry. It is likely to remain the case decades into the future.
PepsiCo’s annual sales were stuck around $60 billion to $70 billion through most of the 2010s but rose sharply in the pandemic era. Revenue rose sharply in the years after 2020 and reached $91.85 billion in 2024. PepsiCo has managed to hold these gains, but the problem is the growth. It is normalizing to single-digit levels like before the pandemic. PEP stock has historically managed to do well despite growing more slowly, so I expect the stock to rebound in earnest as interest rate cuts take effect.
PepsiCo has $51.4 billion in debt and reported $919 million in net interest losses in FY 2024. Margins will be improved significantly as servicing its debt becomes less of a burden.
In the meantime, you can lock in a 4.06% forward dividend yield. Dividends have been raised for 52 consecutive years, making PEP a Dividend King.
Altria (MO)
It might seem easy to make a long-term argument against a company like Altria (NYSE:MO). It sells cigarettes, and cigs are on their way out in the next few years. But you may want to look deeper into what certain cigarette companies are doing to counter this trend.
The decline is gradual, and companies like Altria can milk every cent on the way down, perhaps for centuries. Marlboro alone owns 45.8% of the U.S. cigarette market, and those who smoke are willing to tolerate the price increases. It’s no secret that tobacco is highly addictive, and sales will stick even during recessions. On top of that, these companies are also diversifying into other nicotine products that aren’t cigarettes.
Altria’s operating margin is 61%, which is better than even the operating margin of Nvidia (NASDAQ:NVDA)!
These fat margins allow management to pay a 6.46% dividend yield. Dividends have been increased for 55 consecutive years.
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