2 Top Dividend Stocks to Buy and Hold Forever

Volatility can make stock market investing a stressful way to grow your nest egg. But established dividend-paying companies can help you rest easier because of their track records of stability and profitability. Let's explore some reasons why Realty Income (NYSE: O) and Dollar General (NYSE: DG) could have a place in your long-term investment portfolio.

Realty Income Corporation

Realty Income Corporation is a real estate investment trust (REIT), which is a type of corporation that's required to return most of its profits to shareholders in exchange for tax benefits. With an annualized return of 10.8% between 1992 and 2017, REITs consistently outperform stocks and bonds, making them a great pick for long-term investors.

Realty Income sets itself apart by focusing on high-quality commercial tenants, often in recession-proof industries like dollar stores and grocery stores. The company maintains a sky-high occupancy rate of 98.7%. Its portfolio is diversified across the United States and Western Europe, with a particular focus on the United Kingdom, where it boasts high-profile tenants like the major supermarket chain Sainsbury's.

Realty Income boasts a dividend yield of 5.63%, trouncing the S&P 500 average of 1.3%. It has increased its payout for 26 consecutive years.

With Federal Reserve interest rates likely around their peak, now is a great time to bet on Realty Income. When the cost of capital falls, it will be easier for the company to raise money and acquire new real estate assets. Falling rates can also make REIT yields more attractive relative to other asset classes (like Treasury bonds), causing their prices to rise.

Dollar General

With shares down 42% this year, Dollar General stock might look like a falling knife. But as Warren Buffett has said, sometimes it can pay to be greedy when others are fearful. The company's recent declines allow patient investors to bet on a high-yield growth stock that looks poised to bounce back.

Despite the alarming stock chart, Dollar General's revenue isn't actually falling. Third-quarter sales jumped 5% year over year to $10.2 billion, with a modest 1.3% rise in same-store sales. The company opened 617 new locations in the quarter, bringing its total store count to 20,523. While operating profit declined 25.3%, this was mainly because financially constrained consumers are spending less on its higher-margin items.

Image source: Getty Images.

High inflation over the last two years has hurt lower-income consumers more than it has the average American. However, investors can expect this challenge to ease over the long term. Price growth has already started to moderate, with the Consumer Price Index (CPI) hitting 2.6% in October.

Dollar General's stock price declines have made its dividend yield particularly attractive at 2.9%, which is quite high for a non-REIT company that only distributes around 40% of its profits. The payout has risen for seven years in a row, and investors should expect this track record to continue.

Which dividend stock is best for you?

Realty Income and Dollar General would both make great additions to a long-term portfolio. But they serve somewhat different strategies. Realty Income is more oriented toward consistent income (it even pays its dividend in monthly installments). But Dollar General is more of a growth-oriented pick. While its 2.9% yield is respectable, expect stock price appreciation to represent the lion's share of its long-term returns.

Should you invest $1,000 in Realty Income right now?

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Will Ebiefung has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.