3 Dividend Stocks Perfect for Millennial Investors

Key Points

• Millennials like investing in REITs, and Realty Income is among the best.

• Philip Morris International's Zyn brand is popular among millennials.

• Millennials witnessed the rise of the iPhone, and should keep Apple stock tucked away in their dividend portfolios.

• 10 stocks we like better than Realty Income ›

There's a common idea that young investors should automatically gravitate to growth stocks and other riskier investments in the name of upside. Admittedly, young investors have a longer time horizon that affords them more time to endure volatility or recover from losses if an investment goes poorly.

But research from The Motley Fool also shows that investors like passive income as well. For instance, while millennial investors do typically favor growth stocks, 35% of those surveyed had an interest in dividend stocks, and young investors were more interested in real estate investment trusts (REITs) than older investors.

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Millennials are entering their prime earning years and still have a long runway for compounding when they reinvest dividends.

As a result, now could be the perfect time for millennials to begin pivoting to dividend stocks. Here are three great examples of stocks that millennials can buy and hold, and reasonably expect increasing dividends for years to come.

Image source: Getty Images.

1. Realty Income

This list starts with Realty Income (NYSE: O), one of the industry's largest and most successful REITs. Millennial investors should love the company's monthly dividend payment schedule. Not only does that represent steady passive income, but it's a frequent reminder of consistency, an essential trait for investing, especially among young investors who are still learning about what goes into building wealth over a long time horizon.

Realty Income acquires and leases single-tenant commercial properties, primarily to retail tenants, like convenience stores, restaurants, and other types of stores. Realty Income's real estate portfolio spans more than 15,600 properties and features net leases, in which the tenant is responsible for things like maintenance, taxes, and insurance. It has made Realty Income a steady and dependable company that has raised its dividend for 32 consecutive years.

The company's annual earnings typically grow at a mid- to low-single-digit percentage rate. That might not excite growth-minded millennials. However, Realty Income is an excellent example of what time and dividend reinvestment can do. The stock has outperformed the S&P 500 over its lifetime when you look at total returns, which factor in reinvested dividends.

2. Phillip Morris International

You wouldn't think tobacco stocks like Philip Morris International (NYSE: PM) would have much relevance to young adults. Smoking rates have declined for decades. However, millennials are at the heart of new nicotine products, like oral nicotine pouches, which have exploded in popularity during the past several years.

Philip Morris International is the world's largest tobacco stock by market cap. It sells Marlboro cigarettes internationally, and owns the heated tobacco brand Iqos, as well as the leading nicotine pouch brand, Zyn. Iqos and Zyn are among a class of smoke-free next-generation products that are reshaping the tobacco industry for a post-smoking world.

Their surging popularity is driving growth at Philip Morris International, making it a stock millennial investors may identify with due to their exposure to Zyn and other similar products. Management recently raised the company's dividend by 8.9%, a vote of confidence in Philip Morris International's future.

3. Apple

Millennials experienced the rise of the iPhone, making Apple (NASDAQ: AAPL) arguably one of the most well-known brands among the millennial generation. The company doesn't innovate quite as much anymore, instead favoring annual iterative updates to its core iOS smartphones and accessories, of which there are more than 2.35 billion worldwide.

As for the stock, Apple has paid and raised its dividend for 12 consecutive years. That dividend should continue to grow for decades to come, given that Apple's dividend payout ratio is just 14% of this year's estimated earnings. Apple spends a ton of its profits buying back stock, but the company has done enough to make it clear that investors can count on that dividend to rise over time.

The iOS ecosystem is a huge competitive moat in a world where modern consumers depend on their devices routinely throughout their daily lives. If Apple can tap into artificial intelligence (AI) as an add-on to its existing products or for a new device, potentially its next iPhone-like breakthrough, it would further cement Apple, already a technology behemoth, as an obvious buy-and-hold forever stock for millennial investors.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Realty Income. The Motley Fool has a disclosure policy.