2 Dividend Stocks to Hold for the Next 10 Years

Key Points

• This top REIT pays you cash every month and currently offers an attractive forward yield of 5.69%.

• Beer and wine consumption is down right now, but an improving economy could make this top imported beer seller a winner.

• 10 stocks we like better than Realty Income ›

Investing in dividend stocks helps you earn regular cash income without lifting a finger. The stock market will occasionally offer you the chance to buy quality dividend stocks at discounts, which means the chance to buy shares of solid companies that offer attractive yields.

Here are two undervalued dividend stocks that you can buy and hold for the next decade.

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1. Realty Income

Realty Income (NYSE: O) is a quality real estate investment trust (REIT) that could benefit if interest rates start to come down. As a REIT, the company is required to distribute at least 90% of its taxable income (excluding net capital gains) to shareholders as dividends. The company owns a large portfolio of properties, pays monthly dividend distributions, and has a long record of growing the dividend.

The rise in interest rates has weighed on the real estate market, which has held the stock in check over the past year. Higher rates not only make future dividends worth less to investors today, but they also raise borrowing costs for acquisitions and developments.

Realty Income has dealt with interest rate cycles since its founding in 1969. It has paid a growing dividend for 30 consecutive years, making it a member of the S&P 500 Dividend Aristocrats index. (Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC.) Realty Income is well diversified with more than 15,000 properties across 91 industries. It also has a strong balance sheet to navigate through a weak real estate market.

Management just closed an expansion of its credit facilities to $5.38 billion, signaling strong interest from institutional investors. The ability to raise low-cost capital in this environment validates Realty Income's strategy. The company focuses on doing business with tenants that are leaders in their industry that can survive a recession. Some of its top tenants are 7-Eleven, Dollar General, and Walmart.

If interest rates come down, the stock should rebound. If not, investors still hold a quality REIT that is paying an attractive forward dividend yield of 5.69% based on its recent monthly dividend distribution of $0.269.

2. Constellation Brands

Constellation Brands (NYSE: STZ) is drawing investor interest after Warren Buffett's Berkshire Hathaway bought a stake in the fourth quarter of 2024. Constellation stock is down 23% year to date as sales came in below expectations this year, yet Berkshire was buying more shares in the first quarter. In April, Constellation raised its quarterly dividend by $0.01 to $1.02, signaling confidence in its long-term trajectory.

Wall Street has soured on the stock over concerns about tariffs, especially with alcoholic beverage sales already weak heading into the year. Constellation's beer business, including sales of popular imports like Modelo and Corona, posted a sales decline in the low single digits to start the year. The wine and spirits business, including Kim Crawford and Casa Noble, are seeing even weaker demand, with adjusted sales down 13% year over year in the quarter.

However, management is sticking with its full-year outlook that calls for adjusted earnings per share to be between $12.60 to $12.90. That is more than enough earnings to cover its next-12-month dividend payment of $4.08.

With the stock trading at a forward price-to-earnings ratio of 13.4 and offering an above-average yield of 2.4%, income investors should consider following Berkshire Hathaway into this one. Management just recently closed a sale of some of its wine brands to focus on higher-end brands that generate stronger sales.

Management attributes the weak sales to lower demand it views as cyclical. The company believes consumption will return to normal levels when the economy improves.

The stock may remain volatile in the near term, but Constellation Brands' recent dividend increase is a signal that management doesn't see permanent change in the long-term direction of the business, making the recent dip an excellent buying opportunity.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Realty Income, and Walmart. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.