1 Dividend Stock to Hold for the Next 10 Years

The stock market has swooned over the last couple of months, but particularly in March with the onset of the Iran war. The S&P 500 index has lost 4.2% this year through March 23.

With the stock market particularly volatile, it's more important than ever to have a long-term investing mindset. That's because these short-term movements get smoothed out over time.

It also helps to buy dividend-paying stocks, particularly those with long histories of making payouts over the years. Realty Income (NYSE: O) has not only paid dividends, it has regularly raised them, even through the most challenging times.

Here's why investors can feel confident about holding this stock for the next decade.

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Steady improvement

Realty Income is a real estate investment trust (REIT). REITs, which own or finance real estate, must pay out at least 90% of their taxable income, making them attractive to dividend-seeking investors.

This REIT primarily owns retail properties, receiving over 79% of its rental income from the sector. While that may give some investors pause, given the threat of e-commerce, the company has shown an ability to rent to resilient companies like grocery, home improvement, dollar, and automotive service stores.

You can see Realty Income's strong execution when looking at its consistently high occupancy rates. They're nearly 99% as of Dec. 31. It has also consistently received higher rents on expired leases. Last year, the company received a 3.9% increase on renewed leases, including 4.9% in the fourth quarter.

It has produced steady increases in adjusted funds from operations (AFFO) per share, a key measure for REITs since it shows cash available for distribution. Last year's AFFO grew about 2%, from $4.19 to $4.28 a share. Management expects a 2.3% to 3.3% increase this year. Importantly, Realty Income's AFFO handily covers its $3.25 annual dividend.

This bodes well for future dividend increases. Looking back, the board of directors has a long history of raising dividends, doing so for 114 straight quarters and 134 increases since the company became public in 1994. This includes raising April's payout from $0.27 to $0.2705. As a side note, for those who prefer frequent payments, Realty Income pays monthly dividends.

At the new monthly dividend rate, the stock has a 5.4% dividend yield. For comparison, that's more than four times the S&P 500's 1.2% yield. The FTSE Nareit All Equity REITs Index yielded 3.7% at the end of February.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.