3 Magnificent S&P 500 Dividend Stocks Down 20% to 33% to Buy and Hold Forever

Dividends have contributed nearly 31% to the total returns of the S&P 500 (SNPINDEX: ^GSPC) index since 1926. That number alone proves what a great investment dividend stocks can be, provided you choose ones that pay regular dividends and preferably increase them over time.

The S&P 500 index itself has some of the finest dividend stocks, many of which have a long track record of dividend increases and have grown investors' money manifold over time. Buying some of these stocks while they're down could turn out to be one of your best investment moves. If you're wondering where to find them, here are three such magnificent S&P 500 dividend stocks that are down between 20% and 33% from their all-time highs to buy now and hold.

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This S&P 500 stock pays a dividend every month

Realty Income (NYSE: O) is a magnificent dividend stock in the true sense. Realty Income has paid a monthly dividend for 30 consecutive years and increased it for 110 consecutive quarters now. The stock yields a solid 5.8%.

While real estate investment trusts (REITs) typically prioritize dividends, Realty Income takes so much pride in its monthly payments that it even calls itself "the monthly dividend company." Realty Income's dividend goal says it all: It aims to "deliver dependable monthly dividends that increase over time," backed by cash flows it earns from long-term net lease agreements.

Realty Income has a massive global portfolio of over 15,000 real estate properties it leases under triple net leases. That means its tenants bear major property-related expenses, such as insurance, property taxes, maintenance, and utilities, while Realty Income sits back and collects rents. It's a high-margin business. To top that, the REIT's properties are spread across 91 industries. The diversity helps the company navigate business downcycles.

Its business model, portfolio, and commitment to dividends make Realty Income one of the best dividend stocks in the S&P 500 that you could buy now and hold forever. With the stock now sitting almost 33% below its all-time highs, it's a great time to buy.

Expect solid dividend growth from this S&P 500 stock

NextEra Energy's (NYSE: NEE) management recently said it will be "disappointed" if the company doesn't deliver close to or at the "top end" of its guidance range for 2025, 2026, and 2027. Between 2024 and 2027, the company expects to grow its adjusted earnings per share by 6% to 8% annually. It also expects operating cash flow to grow at an even faster clip and aims to raise its annual dividend by around 10% through at least 2026.

NEE data by YCharts.

A double-digit dividend growth from a utility stock is truly impressive. NextEra Energy operates Florida Power & Light (FPL), the largest electric utility in America. Even better, NextEra Energy is also the world's largest producer of renewable energy from wind and solar and is rapidly growing its asset base.

Its renewables backlog, for instance, crossed 27 gigawatts (GW) in the first quarter. By 2027, NextEra Energy expects to have an operational capacity of over 70 GW. Meanwhile, FPL has already applied for a base-rate plan through 2029, which should help it cover costs while meeting the needs of its growing customer base.

Buying a dividend stock with nearly 10% potential annual dividend growth sounds like a deal for this S&P 500 stock, especially now, when it's trading nearly 30% down from all-time highs and yielding a good 3.2%.

42 years of unstoppable dividend raises

ExxonMobil (NYSE: XOM) is one of the best oil dividend stocks in the S&P 500 index. The oil giant has a phenomenal dividend track record, having increased its dividend in each of the past 42 consecutive years and growing it at an impressive compound annual rate of 6% during the period. That's no small feat for a company whose earnings and cash flows are subject to the volatility in commodity prices.

ExxonMobil has a strong commitment to dividends, but its dividends have been safe because the company focuses on cash flows. The oil major reinvests in business, maintains a strong balance sheet, and distributes surplus cash to its shareholders.

XOM data by YCharts.

ExxonMobil is now striving for lower costs and breakeven in its upstream business and a better product mix among other businesses, like chemicals, specialty products, and low-carbon solutions. Combined, these efforts could boost ExxonMobil's earnings by over $20 billion and cash flows by nearly $30 billion in just five years.

A good portion of that cash should end up in shareholders' pockets, which means investors who buy ExxonMobil stock now can expect bigger dividends year after year for years to come. With ExxonMobil stock also trading nearly 20% below all-time highs as of this writing and yielding 3.8%, it's a great time to buy this S&P 500 dividend stock.

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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy and Realty Income. The Motley Fool has a disclosure policy.