If you’re retired or about to retire, you’re probably considering generating passive income to supplement your Social Security checks. You just want to make sure you find stocks that are worth buying now and holding for the long term. And that’s exactly what you’ll likely find with Agree with real estate (NYSE:ADC) And Bank of Nova Scotia (NYSE:BNS). Here’s what you need to know about these two buy-and-hold stocks.
1. Okay, Realty is experiencing tremendous growth
Dividend investors looking at Agree Realty might look at its dividend payment history and notice that it cut the dividend in 2011. Don’t toss the stock in the trash because of this; it’s a very different stock today than it was back then. To put a number on this, when Agree cut the dividend, it owned fewer than 100 properties. The bankruptcy of one of its tenants at that time was a huge deal and necessitated a reduction in dividends. At the end of the first quarter of 2024, Agree had a portfolio of more than 2,100 properties. No tenant or property is as important as it was when the company cut its dividend.
But there is a second problem to consider. This confidence in real estate investment (REIT) has grown significantly over the past decade. And this growth has translated into a considerable increase in dividend payouts, with compound annualized growth of around 6% per year over the past decade. That’s pretty attractive for a REIT and comes from a stock with a dividend yield of nearly 4.9%. THE S&P500 the index returns less than 1.3%. A substantial yield, approximately a decade of dividend growth, and an attractive dividend growth rate. Not a bad combination.
So the real question is how long will Agree grow? This question is difficult to answer, but a comparison with a peer might help. Agree’s biggest competitor, Real estate income, owns more than 15,400 properties. Simply put, it looks like Agree is far from done growing its portfolio size and likely its dividend.
2. Scotiabank has been paying dividends since 1833
The Bank of Nova Scotia, better known as Scotiabank, has been paying dividends for over 150 years without interruption. There is no reason to believe this streak is about to end. The dividend yield currently stands at a very attractive level of around 6.7%, around double the average for a bank. You may be thinking that something is wrong here, and you are right. Scotiabank has underperformed its peers and is currently reorganizing its portfolio.
Scotiabank originated in Canada, but unlike most major Canadian banks banks, it chose to skip the American market and expand into South America. This has not worked as well as hoped and management is now refocusing on the most profitable countries (like Mexico) and considering exiting the less profitable countries (like Colombia). It will likely take a few years for the company to turn around and investors are turning to other banks.
But it’s an opportunity for investors who think in decades, not days. You can earn a huge return from a company with a long track record of reliably rewarding investors with dividends. To be fair, the dividend might not grow much, if at all, for a while. That’s not great, but the 6.7% starting dividend yield is fair compensation while we wait for turnaround efforts to materialize. You can also take a little more comfort here, knowing that heavily regulated Canadian banks like Scotiabank have government-protected market positions in Canada and tend to operate very conservatively across their entire business.
Retirees Need Reliable Dividend Stocks
If you’re retired or about to retire, you can’t afford to buy just any old dividend stocks. You need stocks that have the means to continue paying you for decades. Agree’s growth opportunities are enormous and should translate into reliable dividend growth for shareholders. Scotiabank’s yield is strong, but its incredible dividend history suggests the turnaround it is undertaking will end well for yield seekers.
Take the time to learn about these two high-yielding companies and one, if not both, could find a place in your portfolio today.
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Ruben Gregg Brewer holds positions in Bank Of Nova Scotia and Realty Income. The Motley Fool posts and recommends Realty Income. The Motley Fool recommends Bank Of Nova Scotia. The Mad Motley has a disclosure policy.
Want decades of passive income? 2 Stocks to Buy Now and Hold Forever was originally published by The Motley Fool
