The 2 Best Dividend Stocks to Buy Now and Hold Forever

Many investors appreciate receiving dividends. After all, paying out a portion of the profit is one of the most direct ways that companies can reward their shareholders.

However, if you're an income-focused investor, it's important to buy shares of companies that can afford to both sustainably pay dividends and invest in their businesses to ensure continued growth. It's not enough for a business to pay a high dividend if it can't remain competitive in the long run.

These two companies top my list of dividend-paying stocks that investors should consider making core parts of their long-term portfolios. In fact, I can't see selling either one.

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1. Coca-Cola

Coca-Cola (NYSE: KO) sold its first beverage in 1886, and now you can find its products in more than 200 countries around the world. Its offerings extend well beyond soda to waters, juices, teas, and dairy and plant-based beverages, among others.

While its days of rapid growth appear to be behind it, Coca-Cola continues to generate steadily higher revenues. In the third quarter, the company's top line, adjusted to remove the impacts of foreign-currency shifts and acquisitions and divestitures, increased by 6%.

That gain was due to a combination of higher prices and a changing sales mix. Ideally, higher volume would contribute. Nonetheless, that's not worrisome in the long run since the stagnation on that front is likely attributable to people feeling stressed by high costs in general and concerns about macroeconomic headwinds. The company will likely emerge stronger once economic conditions improve, since Coca-Cola continues to gain market share.

Meanwhile, it produces plenty of profit to support dividends: Its payout ratio is a comfortable 67%.

It doesn't just keep its payouts constant, either. It's a Dividend King, one of a fairly small group of companies that have increased their payments for at least 50 straight years. The board of directors raised the quarterly payout by more than 5% earlier in 2025, extending its streak to 63 straight years.

At the current stock price, Coca-Cola has a 2.9% dividend yield, higher than the S&P 500 index's average of 1.1%.

2. Home Depot

Home Depot (NYSE: HD) is the largest retailer by sales in the home improvement industry. While it has long catered to both do-it-yourself customers and professional contractors, it has recently made moves to bolster its business with the professionals, including its acquisitions of SRS Distribution and GMS.

With many homeowners holding off on big projects, Home Depot's sales have been sluggish. In its fiscal third quarter, which ended Nov. 2, same-store sales increased just 0.2%. Failing customer traffic subtracted 1.6 percentage points from the comps total, while higher spending added 1.8 percentage points.

However, Home Depot's results are cyclical. When consumers feel good about their economic situations, they'll buy houses and perform major renovations. When they do, given Home Depot's large presence in the space, homeowners and contractors will inevitably turn to it to buy much of what they need.

While they wait for that rebound in home-related spending, shareholders can confidently collect dividends. That's because Home Depot produced $10.4 billion in free cash flow, which gave it plenty of cushion to pay its $6.9 billion in dividends.

Management also places a high priority on dividends. After reinvesting in the business, it says it plans to use its cash flow first to pay dividends, and then for share repurchases.

Home Depot also has an impressive dividend history. It has raised its payouts every year since 2010. Even during the challenging years of the Great Recession (from 2007 through 2009), it kept its payouts constant.

At the current share price, Home Depot offers a market-beating 2.6% dividend yield.

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