These 3 Dividend Stocks Could Be Smart Buys In 2023

2023 could be another volatile year for investors, but that doesn't mean there won't be good buying opportunities. Dividend stocks are fantastic investments in a volatile market because they provide investors with consistent and reliable income during uneasy times.

Three stocks that look particularly appealing for long-term growth opportunities and attractive dividend yields at today's pricing are Digital Realty Trust (DLR 0.63%), STAG Industrial (STAG -0.60%), and Iron Mountain (IRM -1.19%). Here's a closer look at each company and why three fool.com contributors believe they could be smart buys in 2023.

Digital Realty Trust is always looking to the future

Kristi Waterworth (Digital Realty Trust): Where other data centers have gone out of business or been absorbed (sometimes by Digital Realty Trust), Digital Realty Trust just keeps plugging along, growing strategically, and being a totally non-dramatic, responsible company. As far as I'm concerned, the best stocks, including data center REITs, are the ones you never hear about.

So what has Digital Realty Trust been doing these last 12 months? Making deals, expanding its reach, and setting itself up to make lots of money for shareholders over the longer term.

As of Jan. 16, 2023, it's made a deal with Hurricane Electric, the world's largest internet backbone, to improve the speed of its service and efficiency to customers in Singapore, Hong Kong, and Sydney, Australia.

The reason this matters is that the more data that's used, the slower the response time can become due to something called data gravity, which is only getting worse. Adding these faster connections for its customers in areas where data gravity is expected to increase, and dramatically so, is a smart move from a company that looks 10 years into the future every day. It gives Digital Realty Trust a competitive advantage and has been a plan in the works for years.

Add to all this constant forethought, a steady and robust dividend, responsible borrowing, and strategic market placement, and really, you have a stock that's unstoppable in the long run. Will it be sexy? Absolutely never. But it will make you money for years to come and deliver reliably as the Information Age rolls on. It's a smart buy in 2023.

STAG Industrial offers growing payouts on a monthly basis

Marc Rapport (STAG Industrial): Five straight years of dividend increases and a solid niche in a resilient market for its properties earn STAG Industrial a spot on our short list here of dividend stocks that could be smart buys this year.

The Boston-based industrial REIT owns a growing portfolio of 563 buildings in 41 U.S. states and has raised its dividend for five straight years. STAG stock currently yields about 4.2% at a share price of about $35 that's down some 20% in the past year.

STAG's lineup of tenants is diverse, as are the sectors they represent. Amazon is its largest, accounting for 3% of STAG's rent, but no other company accounts for more than 1%. And air freight and logistics account for about 11% of its tenants' business, with the rest in 19 other sectors. The top 20 account for about 60% of STAG's business.

That diversity and demand -- in its third-quarter 2022 report, the company says its occupancy rate was 98.2% -- should allow STAG to continue to combat inflation with healthy rate increases as e-commerce activity and reshoring growth among manufacturers and distributors help keep its buildings bustling and its profits growing.

Funds from operations (FFO) is a measure of recurring operating earnings. It's considered a key indicator of a REIT's profitability and its ability to continue paying and, ideally, growing dividends. Looking at FFO per share, meanwhile, is a good way to gauge its current share price.

STAG shares are currently selling at a price/FFO ratio of about 12.2. The largest of all industrial REITs, Prologis, is selling for a ratio of about 15.6. That, combined with a downtrodden share price, makes STAG a good deal for both potential growth and current and future income. Oh, and it pays monthly -- a nice feature, perhaps, especially for retirees who depend on passive income streams.

Iron Mountain has a hold on the storage industry

Liz Brumer-Smith (Iron Mountain): Iron Mountain is a diversified REIT that helps customers store physical goods in secure industrial warehouses, and digital data in its data center facilities. This unique company has been in operation for over 70 years. After starting out as a single storage unit for hard assets during the Cold War, the company has grown substantially from its original storage site in an abandoned iron mine.

Today, the REIT has an interest in or ownership of 96 million square feet of warehouse and data center facilities, serving over 225,000 customers across the world. And its services go far beyond storing physical assets like sensitive data, important files and documents, historical artifacts, and collectibles. The company has branched into the 21st century after acquiring 28 facilities, and it offers a slew of digital asset management solutions for its clients.

The company's bread-and-butter business is still its hard assets storage, which is still seeing strong demand. Customers around the world rely on safe and secure facilities for storing important records and other commodities. The cost-intensive manner of safely storing these items means many of its clients don't have the bandwidth to store these items in-house, creating long-term demand for Iron Mountain's services.

The company has a lofty goal of achieving a 10% compounded annual growth rate (CAGR) for its revenues by 2026, while growing its AFFO (adjusted funds from operation) by 7%. This five-year goal seems achievable considering the robust demand it's seeing for its services and facilities today. The company's in a healthy financial position, aggressively tackling its debt to reduce its leverage exposure and maintaining a safe dividend coverage ratio.

The stock isn't well known for massive or consistent dividend increases, but it has delivered exceptional share price growth over the last one-, three-, and five-year periods. Last year alone, Iron Mountain provided an annualized return of 22%, while the S&P 500 fell by 13%. High returns like this may not be sustained at this same rate over the next five years, but I believe it's positioning itself to continue to outperform the broader market while paying an attractive dividend yield of just under 5%.