Better Passive Income Opportunity: 10-Year Treasury Notes Yielding 5% or These 3 S&P 500 Dividend Stocks? History Offers a Clear Answer.

For the first time since mid-2007, 10-year Treasury notes are yielding a head-turning 5%. Income investors who have held dividend stocks -- out of necessity -- for years now finally have a compelling alternative.

This begs the question: Which should an income-minded investor hold right now? As always, it depends. While "past performance is no guarantee of future results," a dividend stock's history can really help you make a smart choice.

To this end, here's a closer look at three different S&P 500 dividend stocks to compare to 10-year Treasuries. Each one meets a very particular need in its own way that just might make it a better choice than government-issued securities.

1. Coca-Cola

You know the company. Coca-Cola (NYSE: KO) is, of course, the parent of beverage brands like Minute Maid juices, Gold Peak teas, Powerade sports drinks, and Dasani water, as well as its namesake cola and an array of other soft drinks, just to name a few. This well-known, highly marketable mix is important, too. It means Coca-Cola always has something to meet consumers' ever-changing tastes. The company also enjoys the marketing leverage that comes with its sheer size.

The beverage behemoth's dividend history reflects its resilience. Not only has it paid one every quarter like clockwork for decades now, but it has raised its annual payouts for 64 consecutive years. That makes it a Dividend King -- one of just a few dozen companies that have raised their payouts annually for 50 years or more.

And that's the key reason to look past this stock's relatively low forward dividend yield of 2.4%. Its payout has grown a lot. The current quarterly payment of $0.53 per share is 51% higher than its payment of $0.35 per share 10 years ago. That's an inflation-beating annualized growth rate of 4.2%.

Perhaps in more tangible terms, a $10,000 investment in Coca-Cola back in 2016 that would have generated about $330 in dividend income that year would be producing right around $500 in annual dividend income this year. The stock itself has also more than doubled during the past decade. That's something else no bond could ever offer.

The key here is being willing to stick with Coca-Cola long enough for its slow-and-steady dividend hikes to compound. If you can't do that, the stock may or may not be a better option than a 10-year Treasury.

2. Realty Income

Realty Income (NYSE: O) shares aren't likely to give you the sort of capital appreciation that Coca-Cola can. With a forward dividend yield of 5.8%, however, (based on a dividend that's now been raised every year for the past 31 years, no less), it's still a better income bet right out of the gate than 10-year Treasuries are.

It's not a household name, but there's a pretty good chance you or someone living in your household regularly sets foot in one of its properties. Realty Income is a real estate investment trust (REIT), meaning it owns a portfolio of revenue-generating real estate and passes along the majority of its profits to shareholders every year before they're taxed at the corporate level.

Its specialty is brick-and-mortar retail, with top tenants including resilient names such as Dollar General, 7-Eleven, Walmart, and FedEx. While retailers in general may be suffering from the ever-intensifying competition from e-commerce, Realty Income's occupancy rate consistently hovers just under 99%.

Image source: Getty Images.

However, there's something else besides this REIT's higher dividend yield that might make it a better option (for some investors) than Treasuries. That's the frequency with which it pays its dividends. Whereas Treasuries pay interest only every six months, Realty Income distributes its dividends monthly, aligning with how most people have to pay their bills.

Realty Income's quarterly per-share payment has grown from $0.202 10 years ago to $0.2715 per share now. That's an annualized growth rate of 3%, which may not be thrilling, but has at least kept up with average inflation... something Treasures' interest payments don't.

3. BlackRock

So what sort of income potential does asset manager BlackRock (NYSE: BLK) bring to the table?

The investment management industry is an interesting business. It seems like it should be performance-based, but it rarely is. Fund managers like BlackRock -- perhaps best known for its iShares family of exchange-traded funds (ETFs) -- typically charge a modest fee based on the amount of investor money under management, regardless of how well or poorly those funds perform. Asset managers just need to ensure they keep as much of investors' money under their management as possible.

And BlackRock does. Its second-quarter net inflows of $198 billion pumped up its assets under management to a hefty $15.3 trillion, inflating revenue by 31% year over year to nearly $7.1 billion, $2.9 billion of which was turned into net income... another fairly typical quarter. This persistent profit, of course, supports equally persistent dividend growth.

To this end, BlackRock has increased its dividend payout every year for the past 16 years, with a 17th hike right around the corner. And by more than a little. The current quarterly payment of $5.73 per share is 150% higher than the $2.29 per share it was dishing out a decade ago. That's annualized growth of 9.6%.

Granted, newcomers will be plugging into a meager forward dividend yield of only 2.2%. That's not much, and certainly less than you'd get from buying a 10-year Treasury yielding 5%.

Just take a step back and look at the longer-term picture. If the foreseeable future looks anything like the recent past, a $10,000 investment in BlackRock that might produce on the order of $220 this year could be generating around $550 in annual dividend income in 10 years. The shares have also delivered respectable (albeit somewhat erratic) long-term price appreciation.

James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends BlackRock, Dollar General, Realty Income, and Walmart. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.