Want Passive Income For Life? 2 Dividend Stocks to Buy and Never Sell

Growth stocks and cryptocurrency can be exciting, but if you want sustainable retirement income to supplement your pension or Social Security, high-yield dividend stocks are the way to go. To put their power into perspective, if you have a portfolio worth $500,000 that averages a yield of 5%, you could be looking at $2,083 in extra cash per month -- with significantly less risk than other types of assets.

Let's dig deeper into why Realty Income (NYSE: O) and Phillip Morris International (NYSE: PM) look like great picks for investors who prioritize safe passive income for the long haul.

Realty Income Corporation

Since its founding with the acquisition of a Taco Bell restaurant in 1969, Realty Income has grown to become one of the largest and most respected real estate investment trusts (REITs) in the U.S. This is a special class of stock, in that REITs are exempt from regular income taxes if they return at least 90% of profits to shareholders through a dividend.

Realty Income stands out because of its business model. Many large REITs specialize in specific industries, such as casinos, data centers, or storage space. But instead of concentrating on a niche, Realty Income targets the relatively broad category of single-tenant freestanding units, which can range from fast-food restaurants to dollar stores and auto-repair shops.

These businesses tend to be classified as consumer staples, which means demand tends to stay strong, even during a difficult economy. This characteristic helps make the company's cash flow recession-resistant, which is crucial in this period of rising economic uncertainty.

Realty Income offers a dividend yield of around 5.1%, which is far above the S&P 500 average of just 1.1%. The company is also starting to enjoy impressive stock-price growth, with shares already up 13% year to date.

Phillip Morris International

Over the last century, tobacco stocks -- especially Phillip Morris's former parent company, Altria Group -- have delivered some of the best inflation-adjusted returns of any public equities. And it isn't hard to see why. Nicotine is a habit-forming chemical, which means people tend to keep buying it even when the price increases or the economy is in a downturn.

However, the characteristics that made the tobacco industry succeed also caused its fall from grace, as people and governments became more aware of its health risks and ethical shortcomings. But instead of sinking with the ship, Phillip Morris has decided to transition away from cigarettes, toward reduced-risk products that can help its customers quit smoking and potentially bring less public-health and reputational damage.

Image source: Getty Images.

Outside the U.S., Phillip Morris has become known for its wildly popular platform called Iqos, which is designed to heat tobacco without burning it, thus releasing fewer harmful chemicals. In 2022, the company also acquired Swedish Match in a $16 billion deal that gave it ownership of the Zyn brand of nicotine pouches, along with a much wider U.S. distribution network. The impacts of these moves are showing up in its results.

Philip Morris' first-quarter sales jumped 9.1% to $10.1 billion, driven by the popularity of its portfolio of smoke-free nicotine products. The company is also solidly profitable, with operating income jumping 9.8% to $3.9 billion. And it returns value to shareholders through a dividend that currently yields 3.5%.

The company has also historically done periodic share repurchases. These were suspended after the Swedish Match acquisition, but could potentially resume if profits continue to grow.

Which stock is best for you?

Realty Income and Phillip Morris International are both great picks for income-hungry investors. That said, Realty Income is better for people who want a stock they can buy and forget about, because of its higher yield and diversified defensive business model. Phillip Morris has a much lower yield, but will probably deliver a bigger total return because of its new and innovative tobacco products.

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