Finding dividend stocks to buy and hold isn’t a matter of chasing yield alone— far too many companies facing limited growth potential instead elect to throw cash to shareholders in an attempt at appeasement. Worse yet, some companies even borrow money to juice dividend yield. While that practice has largely gone out of favor in a higher interest rate regime, other underhanded tricks remain that effectively put short-term income ahead of long-term growth.
That’s why forever dividend stocks have two core qualities: ongoing growth potential and sustainable distributions. These three companies have each, making them ideal dividend stocks for a long-term portfolio.
Occidental Petroleum (OXY)
Following Warren Buffett’s lead might be your best bet if you want a forever dividend stock. And when it comes to dividend stocks with long-term growth potential, it’s hard to beat Occidental Petroleum (NYSE:OXY). Combine that with a 14.6 payout ratio generating a 5.5% total yield, and there’s a clear upside from an income and growth perspective.
Throughout the past few years, but particularly in 2023, Buffett went on an OXY buying spree. He ultimately accumulated a 27% stake in the oil and gas company worth more than $14.5 billion, with enough warrants to bump his ownership up to 33% if exercised.
Though OXY tends to trade in a fairly tight band between $55 and $65 per share, it’s currently priced right around its 52-week low. That represents an ideal entry point if you’re trying to time a forever dividend stock purchase—but, with the company’s strength and Buffett’s backing, there’s really not a bad time to buy.
Verizon (VZ)
Recent churn throughout telecom put many mature companies through the wringer, with dividend aristocrat Verizon (NYSE:VZ) suffering alongside the rest. But, despite short-term volatility, there’s long-term potential for those looking for dividend stocks to buy and hold forever.
Most of the stock suppression came from last summer’s lead shielding scandal, which, in hindsight, turned out to be less impactful on telecom companies’ bottom line than expected. But Verizon’s shares haven’t fully recovered yet. The stock has been fairly flat over the past twelve months, returning just 2.36% compared to the S&P 500’s 21% gain over the same period.
Verizon’s recent earnings report indicates ongoing growth, which positions investors for capital gains while generating dividend income. The company tacked on a whopping 16.9% postpaid phone additions (new cell subscriber plans) in the most recent quarter compared to last year, its best performance in four years. Expansion of that magnitude in as mature an industry as telecom indicates that VZ is snagging subscribers from the competition while right-sizing its marketing strategy.
Verizon’s current yield is just shy of 7%. While some analysts might see the stock as a value trap, it’s recent repricing alongside promising growth prospects make it a top pick among dividend stocks to buy and hold.
Realty Income (O)
Is it even a list of dividend stocks to buy and hold if you don’t mention Realty Income (NYSE:O)? The long-standing dividend favorite is also spreading its wings into new markets as it closed its planned merger with Spirit Realty Capital this week, marking an important pivot point for the company after a fairly tough few years.
But, growth prospects aside, the company’s latest earnings report indicates an upside that isn’t immediately apparent from its per-share price performance. Despite a minor dip in occupancy rates, an impressive 98.8% of Realty Income’s properties continue to generate cash flow for shareholders. Furthermore, the company has increased its profit margins from these properties, with funds from operations climbing to $1.04 per share from $0.97 in 2022. The company’s ongoing acquisition strategy also suggests potential for continued growth.
With a current dividend yield of about 5.5%, Realty Income presents a compelling option for investors seeking consistent monthly income, outperforming many of the highest-yielding savings and money market accounts available today. Likewise, the stock suppression represents a unique opportunity for investors to throw cash at Realty Income on the cheap.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.