There's a strong parallel between investing for passive income and planting an apple tree. Both require some work up front. But if all goes well, you can reap the fruits of those labors (literally, in the case of the apple tree) for years afterward.
Of course, there are some potential pitfalls. An apple tree could become diseased and stop bearing fruit. Similarly, the companies you invest in could struggle and stop distributing income.
The good news for investors is that selecting the right dividend stocks can minimize the risk of that happening. Want decades of passive income? Here are three stocks to buy now and hold forever.
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1. AbbVie
If you're looking for the companies with the best dividend track records, you'll want to check out the elite group of stocks known as the Dividend Kings. The list includes over 50 stocks. I think AbbVie (ABBV +0.31%) ranks as one of the best.
Many of the Dividend Kings don't offer kingly yields. However, AbbVie does. At its current share price, the drugmaker's forward dividend yield stands at 3.5%. Moreover, AbbVie has increased its payouts annually for 53 consecutive years. It has more than quadrupled its dividend since its spinoff from Abbott Laboratories in 2013.
NYSE: ABBV
Key Data Points
You'll get more than just a dividend with AbbVie, though. The company should have solid growth prospects thanks to rising stars such as Rinvoq, Skyrizi, Ubrelvy, and Qulipta. AbbVie's pipeline looks promising as well, with around 90 programs in clinical development, roughly 50 of which are in mid- or late-stage testing.
Perhaps the most impressive thing about AbbVie, other than its dividend, is the company's resilience. Not long ago, it faced the loss of patent exclusivity for its top-selling product, the autoimmune disease drug Humira. Today, the company has two successors treatments to Humira that together are on track to be even bigger winners.
2. Enbridge
Want even more passive income? Consider investing in Enbridge (ENB +0.64%). At its current share price, this midstream energy leader offers a forward dividend yield that's a hair over 6%. And while Enbridge isn't a Dividend King like AbbVie, it has increased its payouts annually for an impressive 30 consecutive years.
Like AbbVie, Enbridge has a highly resilient business. Around 80% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) are protected against inflation. Less than 1% of its EBITDA is tied to volatile commodity prices. Roughly 98% of its EBITDA is either regulated or contracted via take-or-pay agreements (where buyers commit to either purchase products or pay a penalty if they don't).
NYSE: ENB
Key Data Points
Enbridge is one of the biggest midstream energy companies. Its pipelines transport around 30% of the crude oil produced in North America and 40% of total U.S. crude oil imports. It also transports close to 20% of all natural gas used in the U.S.
In addition, thanks to some strategic acquisitions in 2023, Enbridge now ranks as the largest natural gas utility in North America by volume. This helps lower the company's risk level even more. I think Enbridge's utility business also makes the passive income the company generates more dependable.
3. Realty Income
Realty Income (O 1.62%) stacks up pretty well with Enbridge when it comes to dividends. The real estate investment trust (REIT) pays a forward dividend yield of 5.6% at the current share price. Realty Income has also boosted its dividend annually for 30 consecutive years.
Another attribute that will appeal to many investors is that Realty Income distributes its dividends monthly rather than quarterly. It even trademarked the name "The Monthly Dividend Company."
NYSE: O
Key Data Points
Realty Income has a strong tenant base, leasing properties to 1,598 different clients across 91 industries. Its triple-net leases generate nearly 100% gross margins since its tenants are responsible for covering major property expenses such as insurance, maintenance, property taxes, and utilities. These leases are also usually long, which provides the REIT with consistent, recurring revenue.
I also like Realty Income's long-term growth prospects. The company targets a total addressable market of around $14 trillion. More than 60% of this market is in Europe, where Realty Income faces only two major rivals.
