2 Reliable Dividend Stocks With Yields Above 5% to Buy Now and Hold Forever

Key Points

• Dividend-paying stocks usually outperform those that don't pay a dividend.

• Realty Income is a leading net lease REIT that has been offering a 5.6% yield.

• Alexandria Real Estate Equities and the life science industry it serves are going through a rough patch.

• 10 stocks we like better than Realty Income ›

You don't need to be an income-seeking investor to appreciate dividend-paying stocks. That's because businesses that commit to returning profits to shareholders have a tendency to outperform businesses that don't.

The average dividend-paying stock in the benchmark S&P 500 index produced a 9.2% annualized return over the 50-year period ended 2024. Stocks in the same index that didn't pay dividends produced a disappointing 4.3% average annual return over the same time frame, according to Hartford Funds and Ned Davis Research.

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Realty Income (NYSE: O) and Alexandria Real Estate Equities (NYSE: ARE) are two reliable dividend payers that offer an average yield of about 6% at recent prices. Here's how they could make excellent portfolio additions for most investors, whether they're interested in above-average returns or growing their passive income stream.

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1. Realty Income

Shares of this real estate investment trust (REIT) are down by about 23% from a peak they reached in 2022.

In June, Realty Income announced its 131st dividend raise since becoming a publicly traded company in 1994. The stock has declined over the past few years, but this reliable dividend grower hasn't lowered its payout. At recent prices, it offers an unusually large 5.6% yield.

While Realty Income's payout has grown steadily, its pace in recent years has been slower than usual. Considering its slowing pace of growth and the rising risk-free rates investors can receive from Treasuries, it's no wonder the dividend stock has been under pressure.

Realty Income is a net lease REIT, which means its tenants are responsible for all of the variable costs of building ownership, such as taxes and maintenance. At the end of March, 98.5% of its portfolio was leased out with an average remaining term of 9.1 years. With annual rent escalators written into long-term leases, cash flows are extremely predictable.

Borrowing costs have risen, but this well-established REIT can source capital at rates its smaller peers can only dream of. With an A3 credit rating from Moody's, and an A- rating from S&P Global, Realty Income recently sold 1.3 billion euros worth of long-term notes at an average yield of 3.7%.

Publicly traded net lease REITs account for about 4% of the addressable market in the U.S. In Europe, this figure is less than 0.1% which means there's lots of opportunity for expansion. With some of the lowest borrowing costs available, Realty Income will get to pick and choose tenants most likely to keep up with their rent. It might not be the most exciting stock to own, but it could be one of the least stressful positions in your portfolio.

2. Alexandria Real Estate Equities

Shares of Alexandria Real Estate Equities are down about 63% from the peak they reached at the end of 2021. This REIT's dividend has been moving in the right direction since 2009, and at recent prices, it offers an eye-popping 6.4% yield.

This specialized REIT acquires and develops real estate for the life science industry. Startup drugmakers experienced a great deal of investment during the COVID-19 pandemic. Unfortunately, enthusiasm for biotechnology start-ups began shrinking in 2022 as dramatically as it had grown a couple of years earlier.

About 53% of Alexandria's annual rental revenue comes from tenants with stock market listings or investment-grade credit ratings. With less established biotechnology companies still responsible for nearly half of rental revenue, investors had reasons to be nervous before the company started revising its forward outlook downward. This April 28, and again on July 21, management lowered expectations for funds from operations (FFO), a proxy for earnings used to evaluate REITs.

Alexandria Real Estate Equities looks like a good stock to buy now because there's still room for significant dividend raises despite the latest guidance revision. Management lowered its FFO expectation to a range between $8.11 and $8.31 per share this year. This is heaps more than the company needs to meet a dividend obligation currently set at $5.28 per share annually.

Now isn't a great time for start-up biotechnology companies, but Alexandria Real Estate isn't having trouble finding established pharmaceutical giants eager to expand operations. Recently, the company executed a 16-year lease on a property with 466,598 rentable square feet. This is its largest lease to date.

Raising rent hasn't been a problem for Alexandria Real Estate. In the first half of 2025, the company reported a 13.2% rental rate increase.

An unusually difficult period for start-up biotech businesses could make the next year or two uncomfortable for Alexandria shareholders. The important thing to remember is that there are still thousands of diseases that lack treatment options, meaning lots of room for drug development companies to grow. This REIT might not return to growth in 2025 or 2026. For investors who buy now and hold for the long run, though, there's a great chance to receive a yield on cost far above 10% a decade from now. Adding some shares to a diversified portfolio looks like a very smart move for patient investors.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alexandria Real Estate Equities, Moody's, Realty Income, and S&P Global. The Motley Fool has a disclosure policy.