Dividend stocks can be a great way to boost your portfolio's growth potential or provide a form of passive income over the years. While not all dividend stocks are the same, finding great companies that can stand the test of time can enable you to magnify your returns through market ups and downs.
Here are two such dividend stocks to consider for your portfolio right now if you have $500 cash to put to work.
1. Pfizer: 6.6%
Pfizer(NYSE: PFE) has been through a rough time in the last few years. The vestiges of its peak pandemic success have fallen into the background, and investors have witnessed a return to normality with the business' growth. Shares are down slightly from the start of 2025. In fact, the stock is trading close to the price it was at a decade ago.
The tepid share price performance this stock has delivered has helped push its dividend yield up to a robust 6.6%. For context, the average S&P 500 stock pays a dividend of around 1.5%. Pfizer is a long-standing dividend payer, and has increased its dividend every single year for 16 years at this point. Growth was definitely bound to normalize and even experience volatility once sales of Comirnaty (its blockbuster COVID-19 vaccine) and oral antiviral drug waned.
Let's take a look at where Pfizer is currently as a business. In the first nine months of 2024, the company reported revenue of around $46 billion, a moderate 2% increase from one year ago. It also generated net income of $7.6 billion in that time frame, a notable 39% year-over-year increase. On a quarterly basis, third-quarter revenue totaled just shy of $18 billion, up 31% from the year-ago period. That top line was up 14% year over year, even if you exclude COVID-19 product revenue.
It's worth pointing out that even with those COVID-19 products taken out of the picture, Pfizer is notably eclipsing its pre-pandemic growth rates. In Q3 2019, Pfizer reported that revenue was actually down 3% from the prior-year period, with total revenue of about $13 billion.
Pfizer is only in the early stages of experiencing the financial rewards of the acquisitions it made using the cash and profits from its blockbuster products during the pandemic's height. These included cancer biotech Seagen, Biohaven Pharmaceuticals (known for its migraine treatment Nurtec), sickle cell disease drugmaker Global Blood Therapeutics, and Arena Pharmaceuticals, which develops drugs for various inflammatory and cardiovascular disorders.
Pfizer anticipates that the effect of these and other acquisitions will enable the company to bring numerous blockbuster drugs to market, significantly amplifying revenue and profits by the early 2030s. Long-standing members of Pfizer's portfolio, like the Vyndaqel family of drugs, Eliquis, and Xtandi, saw revenue growth of 63%, 9%, and 28%, respectively, in Q3 2024. Newer additions to Pfizer's portfolio, like Nurtec, witnessed 45% operational growth in the three-month period.
Pfizer's oncology drugs, bolstered significantly by its acquisition of Seagen, are expected to be a key contributor to growth moving forward. Management estimates that the company will have eight blockbuster drugs in its oncology portfolio by the early 2030s. It already boasts blockbuster cancer drugs like Ibrance, a first-line treatment for metastatic breast cancer. Ibrance has an addressable patient population that includes 70% of all women with breast cancer.
I still firmly believe that this company has a strong growth story still to achieve, and that its best days are far from being behind it. For long-term investors with a generous time horizon of five years or longer, there could be numerous reasons to consider a position in this stock, which currently trades at less than $30 per share.
2. Realty Income: 5.8%
Realty Income(NYSE: O) is a real estate investment trust (REIT) that bears the distinction of being a monthly dividend payer, with a stellar dividend history. By law, REITs are required to pay out at least 90% of taxable income as dividends.
Realty Income's business model has proven to be incredibly profitable over time. Investors who have stayed with the stock for years have benefited significantly from that growth trajectory. Not only does Realty Income's dividend yield of about 5.8% notably outpace the S&P 500 stock average, but the REIT has paid investors a dividend for 655 consecutive quarters at this point. That's about 55 straight years of paying a dividend every single month.
Realty Income's forward annual dividend rate is $3.17 per share as of this writing. For some added perspective, Realty Income's payout has increased by about 40% over the past decade.
That's during a time when many retail businesses have struggled to adapt to a changing environment, and Realty Income's tenants are some of the top retail clients around. However, Realty Income maintains a diverse tenant structure, with a portfolio of over 15,000 properties worldwide spread across 90 industries, rented by more than 1,500 different tenants.
These tenants have included the likes of Chipotle Mexican Grill, 7-Eleven (owned by Seven & I Holdings), Dollar General, Walgreens, Wynn Resorts, and Lowe's. The top five industries represented in Realty Income's portfolio are grocery stores, convenience stores, dollar stores, home improvement stores, and quick service restaurants.
This is a healthy mix of businesses with exposure to both discretionary and nondiscretionary consumer spending. One of the most sticky aspects of Realty Income's business model is its triple net lease arrangements with its tenants.
First, Realty Income purchases retail, industrial, and agricultural properties. It then leases these properties to tenants under triple net lease structures where the tenant takes on most of the operating costs for the property, including taxes, insurance, and maintenance.
For the first nine months of 2024, Realty Income reported total revenue of just under $4 billion, up 31% from the prior year. Funds from operations (FFO) came to $2.6 billion, a 22% bump from the same period in 2023. Investors searching for consistent portfolio income for the long run may want to consider this top dividend stock.
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Pfizer, and Realty Income. The Motley Fool recommends Lowe's Companies and recommends the following options: short March 2025 $58 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
