It's common knowledge that investing now, at whatever stage you're at in life, gives you the best opportunity to grow your money for the future. Even if you're retired, you can still gain from your investments -- and one of the best ways to do that is through passive income. Reliable dividend stocks that steadily increase payouts and offer competitive yields can help set you up for life, whether you're investing for the future or need passive income right now. Starbucks (SBUX 0.47%) and Realty Income (O -0.17%) are two top choices.
1. Starbucks: The king of coffee also pays a great dividend
Starbucks has been a market-beating stock for years. It's the largest coffee shop chain in the world, and has its sights set on being the largest fast-food restaurant chain in the world. It hit 37,000 global stores in 2023, but is planning on reaching 55,000 by 2030, which would well surpass McDonalds' 40,000 stores.
Despite major declines at the beginning of the pandemic, Starbucks roared back with double-digit sales increases. Sales were up 12% year over year in the 2023 fiscal third quarter (ended July 2), powered by a 10% rise in comparable sales. Earnings per share (EPS) were $0.99, or 25% higher than last year.
Starbucks has been going through some serious changes while keeping its flavor. Changes include a new CEO who came on board in April, and the strategic shift from what it calls a "third place" for parties to meet outside of work or home to a digital-first operator focused on speed, omnichannel options, and beverage innovation.
Also, the company is working to open new stores in suburban areas as more people work from home, and it's pivoting to store formats that offer drive-thrus, curbside pickup, and other modern shopping features. These steps should help Starbucks maintain growth going forward.
Starbucks' dividend yields 2.2% at its recent price, and the dividend has been raised annually since it was started in 2010. It's increased nearly 1,000% since that time, and investors should expect that to continue.
2. Realty Income: The no-brainer monthly dividend stock
Any investor looking to own dividend stocks should have at least one real estate investment trust (REIT) stock in their portfolio. REITs are real estate companies that own and lease properties, and they're structured in a way that requires them to pay out 90% of income as dividends in general.
But not all REITs are created equal. Some have incredibly high yields but come with a fair amount of risk. Others pay moderate yields. Realty Income stands out because it pays a monthly, growing dividend, is one of the largest and safest REITs, and pays a high yield.
Realty Income owns more than 13,000 properties and growing, and its top tenants operate in essential categories, making them secure for lease payments. Its top two categories are convenience stores and grocery stores, which combined account for 20% of all leases, and its top three clients are Dollar General, Walgreens, and Dollar Tree -- but the trust services a wide array of sectors including automotive, home improvement, and health and fitness, providing it with solid diversification.
This REIT typically gets near 100% occupancy, in part due to its focus on essential retail. Even during the worst pandemic closures, when some retailers shut their doors and had to close, occupancy only dipped to 97.9%. Today it's at 99%.
As large as it is, Realty Income has lots of room to grow both in the U.S. and internationally. It sees a $12 trillion opportunity and has identified $95 billion of sourced acquisition material.
Realty Income has paid a dividend for 693 months consecutively, and increased the dividend for 103 consecutive quarters. Its dividend yields 4.9% at the current price, which isn't the highest available, but it comes with monthly passive income and appears to be as reliable as you can get.
