2 Dividend Stocks to Hold for the Next 10 Years

Dividend stocks can offer consistent income and strong long-term returns, especially when their payouts grow steadily over the years. Even small increases in dividends can compound into impressive returns over the long term.

Realty Income (NYSE: O) and NextEra Energy (NYSE: NEE) exemplify this as both have increased their dividend payments at least once a year for more than three decades. With their consistent dividend growth likely to continue, these companies are reliable options for dividend-focused investors to hold over the next decade.

Built to pay a growing dividend

Realty Income is one of the most dependable dividend stocks around. The real estate investment trust (REIT) has paid 663 consecutive monthly dividends throughout its history. It has raised its dividend payment 132 times since its public market listing in 1994. It has increased its dividend every year for more than three decades and for the past 112 quarters in a row. The REIT has grown its payout at a solid 4.2% compound annual rate during that period. That has helped it deliver an average annual total return of 13.5% over the past 30+ years.

The landlord has built an excellent foundation to support its dividend, which currently yields around 5.5%. It owns a diversified portfolio of over 15,600 retail, industrial, casino, and other properties across the U.S. and Europe secured by long-term net leases with many of the world's leading companies. Those leases provide it with very stable rental income because tenants cover all property operating costs.

Realty Income pays out a conservative percentage of its steady rental income in dividends (75% of its adjusted funds from operations). This allows the REIT to retain a significant amount of cash to invest in new income-generating properties. Realty Income also boasts one of the strongest balance sheets in the REIT sector, providing it with additional financial flexibility to invest in income-producing real estate.

While Realty Income is already one of the largest REITs in the world (the sixth largest, with $61 billion in real estate), it sees significant potential for continued expansion. The company estimates that $14 trillion of real estate in the U.S. and Europe is suitable for net leases. Access to this vast market provides a clear path for Realty Income to grow its portfolio and, consequently, its dividend over the coming years.

A powerful dividend growth stock

NextEra Energy has increased its dividend for more than 30 straight years. The utility has grown its payout at an impressive 10% compound annual rate over the past two decades. That has helped power a 14.1% average annual total return over the last 20 years.

The power company expects to grow its nearly 3%-yielding dividend by about 10% annually through at least next year, supported by its conservative dividend payout ratio and healthy growth profile. NextEra Energy expects to grow its adjusted earnings per share at or near the top end of its 6%-8% annual target range through 2027. Driving this projection is a large backlog of renewable energy development projects in its energy resources segment and the continued expansion of its leading Florida electric utility (FPL).

NextEra Energy should be able to continue growing at an above-average rate for years to come. Florida's population is growing fast and could add another 3 million people by 2040, increasing its total to 26.7 million. That will enable FPL to continue expanding its electric utility operations in the state. FPL also plans to continue investing heavily in solar energy, significantly expanding what's already the country's largest utility-owned solar energy platform over the next decade.

Meanwhile, electricity demand in the country should continue growing significantly in the coming decades, driven by trends such as artificial intelligence (AI) data center expansion, manufacturing growth, and more widespread use of electric vehicles. These factors present ongoing growth opportunities for NextEra Energy. The company's long-term growth drivers include expanding electricity transmission lines, developing additional renewable energy capacity, constructing new gas infrastructure such as pipelines and power plants, and increasing its nuclear energy capacity.

This multitude of growth catalysts should support above-average dividend growth for NextEra Energy over the next decade.

Excellent long-term investments

Realty Income and NextEra Energy have outstanding records of increasing their dividends, trends that should continue over the next decade. That makes them ideal dividend stocks to hold long-term.

Matt DiLallo has positions in NextEra Energy and Realty Income. The Motley Fool has positions in and recommends NextEra Energy and Realty Income. The Motley Fool has a disclosure policy.