One of the best aspects of putting your money to work on Wall Street is there’s no one-size-fits-all blueprint for success. With thousands of publicly traded companies and exchange-traded funds (ETFs) to choose from, there’s likely to be one or more stocks that can help you meet your investment goals.
But among the countless strategies investors can employ to build their wealth on Wall Street, few have been more successful than buying and holding high-quality dividend stocks.
In The Power of Dividends: Past, Present, and Future, the analysts at Hartford Funds, in collaboration with Ned Davis Research, compared the performance of dividend stocks to non-payers over a 50-year stretch (1973-2023). What they found was a night-and-day outperformance by the income stocks.
According Hartford Funds, dividend stocks averaged an annual return of 9.17% over a half-century and were 6% less volatile than the benchmark S&P 500. Meanwhile, the non-payers generated a modest 4.27% average annual return and were 18% more volatile than the S&P 500. Since income stocks tend to be recurringly profitable and time-tested, this outperformance isn’t a surprise.
The concern for income investors is that yield and risk tend to correlate. While ultra-high-yielding stocks — those with yields four or more times higher than the yield of the S&P 500 — are enticing, there’s a heightened possibility of poor returns. Since yield is a function of payout relative to share price, a company with a struggling or failing operating model can lure investors in with a high but unsustainable yield.
The silver lining for income seekers is that not all supercharged dividend stocks are bad news. In fact, some of the most-promising high-yielding stocks are doling out their payments on a monthly basis.
If you want $200 in super-safe monthly dividend income in 2025, simply invest $22,050 (split equally, three ways) into the following three ultra-high-yield stocks, which sport an average yield of 10.9%!
Arguably the safest ultra-high-yielding monthly dividend stock on the planet is premier retail real estate investment trust (REIT) Realty Income (NYSE: O). Realty Income is yielding 6% and has increased its payout for 109 consecutive quarters (more than 27 straight years).
What makes Realty Income so special is the company’s top-notch commercial real estate (CRE) portfolio. As of the end of September, it contained close to 15,500 CRE properties, roughly 90% of which are resilient to economic downturns.
The not-so-subtle secret to success for Realty Income is that it primarily leases to well-known, stand-alone businesses that draw customer traffic in any economic climate. Some of its core lease categories include grocery stores, convenience stores, and dollar stores, which are destinations for consumers regardless of how well or poorly the U.S. economy is performing. Being well-diversified by client and geography ensures that its funds from operations (FFO) remains highly predictable from one year to the next.
