To be perfectly clear, there's no guarantee that any stock will make you rich over time. However, rock-solid dividend stocks with a solid track record of executing on growth strategies and delivering strong returns can be a smart way to go, especially if you plan to measure your returns in decades.
With that in mind, there are some dividend stocks that have an excellent chance of delivering market-beating returns for decades to come. Here are three in particular that could be smart additions as we head into 2024.
A great business in good times and bad
Realty Income(NYSE: O) is the first real estate stock I ever bought, and I've added to my investment several times over the years.
If you aren't familiar, Realty Income is a real estate investment trust, or REIT, that primarily focuses on single-tenant retail properties. It owns more than 13,250 properties throughout the U.S. and Europe, and most were hand-selected for their recession-resistant and e-commerce-resistant qualities. The business model is designed to produce steadily growing income and to create shareholder value over time, and the proof is in the numbers.
Since listing on the NYSE in 1994, Realty Income has produced a 13.4% annualized total return, handily beating the S&P 500. It yields about 5.3% at the current share price, and because of its steady growth approach, has increased its monthly dividend amount a staggering 123 times since going public in 1994.
A solid track record and several key growth drivers
With a 3.3% yield, Brookfield Asset Management(NYSE: BAM) isn't exactly the highest-paying dividend stock on this list, but it's a fantastic combination of growth potential and income that could produce excellent long-term total returns.
Formerly a wholly owned subsidiary of Brookfield Corp(NYSE: BN), Brookfield Asset Management started trading separately in late 2022. It provides alternative asset-management services across several areas, such as renewable power, real estate, and infrastructure, investing money on behalf of clients. To put it mildly, there's a lot of investor appetite for alternative investments, and management believes it can double its fee-bearing capital under management within the next several years.
Brookfield Asset Management is still in the relatively early days of being an independent company, but it's important to point out that one of the key reasons Brookfield decided to separate it is to make it an income-focused business. Management plans to distribute 90% of Brookfield's earnings and has said that it expects the payout to double over the next five years.
You don't have to do extraordinary things
Legendary investor Warren Buffett once said "It is not necessary to do extraordinary things to get extraordinary results." And he said it about index-fund investing.
One interesting index fund dividend investors might want to take a closer look at is the Vanguard Real Estate ETF(NYSEMKT: VNQ), which invests in a portfolio of real estate investment trusts, or REITs (Realty Income is one of its major holdings). As we head into 2024, it could be an especially good time to add shares of this ETF, as real estate significantly underperformed the overall stock market in 2023. In short, while most of the underlying businesses are doing just fine, real estate is a very interest rate-sensitive sector. But with rates widely expected to fall, it could be a great opportunity for patient, long-term investors to buy.
Could a $5,000 investment make you rich?
As I said earlier, a stock's past performance doesn't mean it's going to do the same thing going forward. But having said that, you might be surprised at how much these stocks could grow your money over time. For example, a $5,000 investment in Realty Income when it went public about 30 years ago would be worth about $252,000 today, assuming you reinvested the dividends you received along the way.
The bottom line is that like any other stock, there's no way to accurately predict the returns of these three, especially over shorter periods. But investing $5,000 in these three stocks could grow into a much larger sum over time, and that's why I own all three in my personal retirement account.
Should you invest $1,000 in Realty Income right now?
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Matthew Frankel, CFP® has positions in Brookfield Asset Management, Brookfield Corporation, Realty Income, and Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Brookfield Asset Management, Brookfield Corporation, Realty Income, and Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool recommends Brookfield. The Motley Fool has a disclosure policy.
