2 Dividend Stocks to Buy for Decades of Passive Income

Key Points

• Realty Income has a time-tested business model that can beat the market, and with less volatility.

• Prologis could be a major beneficiary of long-term growth in e-commerce.

• Both stocks could have positive tailwinds over the next few years.

• These 10 stocks could mint the next wave of millionaires ›

The stock market as a whole is starting to look expensive. The S&P 500, Nasdaq, Dow Jones Industrial Average, and many other key benchmark indices are within a few percentage points of all-time highs, and all look historically expensive by several valuation metrics, including average P/E ratios, price-to-book multiples, and more.

However, there are still some excellent long-term opportunities to be found, and that's especially true when it comes to high-yield stocks. With interest rates still at a historically high level, dividend stocks can be a bright spot in the market where it's still possible to find reasonable valuations for investments to buy and hold for the long haul.

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With that in mind, here are two high-paying dividend stocks in particular that could be excellent investments right now if you're a patient investor looking for great income and total returns.

Image source: Getty Images.

The best overall high-dividend stock in the market?

I've called Realty Income (NYSE: O) my favorite overall dividend stock in the market, and as one of the largest positions in my own portfolio, I've put my money where my mouth (or keyboard) is.

If you aren't familiar with it, Realty Income is a real estate investment trust, or REIT (pronounced 'reet'), and it invests in single-tenant properties. About three-fourths of its tenants are retail in nature, and it also has industrial, agricultural, and gaming properties. Its retail tenants are hand-picked for their recession resistance and/or their lack of vulnerability to e-commerce. Plus, tenants sign long-term leases with gradual rent increases built in, and agree to pay insurance, taxes, and most maintenance costs.

This model allows Realty Income to generate excellent total returns over the long run, and with less overall volatility than the S&P 500. And the proof is in the performance. Although Realty Income has underperformed (as would be expected) during rising-rate environments, since its 1994 IPO it has produced 13.5% annualized total returns for investors, well ahead of the S&P 500, and it has raised its dividend for the past 112 consecutive quarters.

Realty Income has rebounded nicely from its recent lows but still trades for about 25% below its all-time high. It has a 5.4% dividend yield and pays in monthly installments (Fun fact: Realty Income has a trademark on the phrase 'The Monthly Dividend Company.'). In a nutshell, Realty Income offers a rare combination of a high yield, market-beating total return potential, and safety.

Excellent long-term tailwinds

Another REIT, Prologis (NYSE: PLD) is another high-dividend stock to put on your radar. One of the largest REITs in the world, Prologis is the leading logistics real estate company, owning warehouses, distribution centers, and other properties all around the world. For example, if you've ever seen one of those massive Amazon (NASDAQ: AMZN) distribution centers, that's an example of the type of property Prologis owns.

The company owns a staggering 1.3 billion square feet of leasable space, and nearly 3% of the world's entire GDP flows through Prologis' properties each year.

Recent results have been strong, after a period of weakening demand resulting from overbuilding during the pandemic years. In the most recent quarter, Prologis reported core funds from operations (Core FFO-the real estate equivalent of 'earnings') growth of 9% year-over-year, and management reported a strong pipeline of leasing activity and plenty of customers ready to grow.

The long-term tailwinds should be more than enough to give Prologis plenty of opportunities to grow. The global e-commerce market (which fuels much of the demand for logistics properties) is expected to more than double in size by 2030, according to Grand View Research. And the data center industry, which Prologis recently entered, is expected to grow just as fast.

Buy with the long term in mind

Both of these stocks are real estate investment trusts, or REITs, and these are an especially rate-sensitive group. As a result, if the Federal Reserve ends up pumping the brakes on further rate cuts, or if inflation unexpectedly picks up, it's possible for these two stocks to be rather volatile in the short term.

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Matt Frankel has positions in Amazon, Prologis, and Realty Income. The Motley Fool has positions in and recommends Amazon, Prologis, and Realty Income. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.