2 Dividend stocks you can buy for decades of passive income

REITs and MLPs are excellent investment options for dividend-oriented investors.
Real Estate Income is a large REIT with a diversified portfolio and high yield.
MPLX is an acquiring pipeline company with an even higher yield.
10 Stocks We Like More Than Real Estate Income ›

If you’re an income investor, you’re probably looking for stocks that can offer low-risk dividend payments.

Meanwhile, you probably also want stocks that will see their dividends cut due to short-term issues.

And you really want a stock with a high dividend yield and a history of increasing dividends every year, so it’s worth holding on to for the long haul.

That’s a lot to ask, but here are two solid dividend stocks that check all those boxes!

Image source: Getty Images.

If you’re looking for high dividend payouts, real estate investment trusts (REITs) are a great place to start. These specialized companies enjoy preferential tax treatment in exchange for paying most of the cash flow from operations similar to REITs as dividends to shareholders and Real estate income (NYSE:O) is one of the biggest of them.

Realty Income has a highly diversified portfolio of 15,600 properties. Its three largest categories are grocery stores (10.7% of the portfolio), convenience stores (9.8%) and restaurants (8.7%), but it also owns casinos, gas stations and many others. Revenue from these properties has grown dramatically over the past three years, from less than $2 billion to USD in 2022 to almost 5.5 billion USD today. The company has consistently boasted an occupancy rate of over 95% (currently at 98.6%) and is also regionally diversified across all 50 states and eight European countries.

Realty Income’s management has increased its dividend every quarter for more than 27 years, ensuring consistent shareholder growth. Even better for retirees and others looking to use dividends to pay for expenses, Realty Income pays dividends monthly instead of quarterly, so you get a check every month. It is unlikely that this situation will ever change, given that Real Estate Income’s registered trademark is The Monthly Dividend Company.

Realty Income offers a solid and ever-growing payout as well as monthly payments, making it a great choice to buy and hold for decades.

Another place to find high dividend yields is in the midstream oil and gas sector. Midstream companies transport and store crude oil, natural gas, and refined products such as diesel and propane. Many mid-sized companies organize as master limited partnerships (MLPs), which are similar to REITs in that they must pass on most of their operating cash flow to investors as dividends. In return, they are given preferential tax treatment by the government.

However, even among average MLPs, MPLX (NYSE:MPLX) has a high yield. However, the company has plenty of funds for this crop. Last year, the company earned 5.7 billion from its operations. USD funds and paid out 3.8 billion. USD in dividends, which means it covers 1.5 times more payouts. In terms of payouts, MPLX has doubled its dividend over the past 10 years, largely due to increases of 10% or more in the past four years.

The good news is that MPLX has grown more than enough to support these high dividends. Revenues have grown dramatically from less than $1 billion. USD in 2016 up to 11.5 billion USD today. This is mainly due to the management’s aggressive acquisition policy. MPLX regularly acquires smaller companies to expand its footprint, most recently acquiring New Mexico-based Northwind Midstream in a $2.4 billion deal. USD deal that was closed last month.

Perhaps the only downside to MPLXs is that, like all MLPs, additional documentation may be required at tax time, especially if they are not held in a tax-advantaged account. That’s because MLPs report their income to shareholders on a Schedule K-1 form, which has different filing requirements than most other types of investments. Additionally, MPLX is an excellent choice for investors looking for decades of passive income.

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John Bromels has no positions in any of the stocks mentioned. The Motley Fool has positions and recommendations on Real Estate Income. The Motley Fool has a disclosure policy.

“2 Dividend Stocks to Buy for Decades of Passive Income” was originally published by The Motley Fool.

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