5 Dividend Stocks to Buy and Hold Forever

Five Dividend Stocks for the Long Term

0:00 One of these five dividend stocks pays almost 6% and another pays less than 1%. But, the bigger check does not automatically make it the better investment. My name is Blake and today on 9-5 Investing, we're going to talk about five dividend stocks to buy and hold forever, what supports their payments, and the risk behind each of them. Then, I will show you the annual dividend amount that will come from splitting $10,000 across all five of these stocks and show you the problem with looking at just that number.

0:25 So, let's start with the company that pays you every single month, one of my personal favorites. That is going to be Realty Income, ticker symbol O, a real estate investment trust that owns commercial properties and collects rent from its tenants.

Realty Income (O): Monthly Dividends

0:39 At December 18th closing price, its latest declared dividend works out to about a 5.75% annual yield or roughly $57.50 a year for every $1,000 invested. That assumes the dividend stays unchanged and every yield in this video uses that same date, so we are making a consistent comparison. But, before you get comfortable with that check, there's an accounting detail that you need to understand because the ordinary earnings payout ratio can be misleading for a real estate investment company.

1:11 Depreciation reduces reported profit as the buildings age, even though this accounting charge itself does not require cash going out the door in the current period. That is why investors look at adjusted funds from operations, known as AFFO, which adjusts earnings for depreciation and other accounting items relevant to the property business. Realty Income's latest annualized dividend is about $3.26 per share compared with its 2026 AFFO guidance of about $4.45.

1:43 That puts the dividend at roughly 73% of that forecast measure, although AFFO is not a guarantee of cash available and guidance can change. The questions to watch are whether tenants keep paying, whether debt can be refinanced at reasonable rates, and whether cash generation grows on a per share basis. So, Realty Income offers the largest starting payment here, but this monthly payment schedule that happens to be large does not really tell you a lot about the overall safety, the risk profile of the investment itself.

2:11 The next ticker on our list today is going to be Coca-Cola, ticker symbol KO, which gives you a different value proposition, a different reason to own this dividend stock.

Coca-Cola (KO): Dividend Growth

2:23 An established brand in a very wide distribution system, for a product that people purchase all the time. Coca-Cola approved its 64th annual dividend increase in 2026, which makes its annualized payout about $2.12 per share. At our comparison price, that is about 2.4% yield, or $24 a year for every $1,000 invested. The attraction of owning Coca-Cola stock is the fact that the company keeps earning money from a network of people that are addicted to a lot of the drinks that they sell.

2:56 But, the question that you have to ask is whether sales growth is actually coming from them selling more drinks, or from them just raising prices. With the latest annualized dividend and trailing reported earnings, Coca-Cola's payout ratio is roughly 64%, which basically means the dividend equals about $0.64 of each dollar of earnings. And you're going to want to think about whether the company can continue to pay out that dividend. So, you're going to want to think about cash flow, investment needs, and debt before deciding how much room the company really has before they're not able to pay out that same dividend.

3:27 I would keep an eye on customer demand, and even more so the price that you pay for Coca-Cola stock, because even a good company at the wrong price can end up being a really bad investment if you're paying too much for it. Now, the third company we're going to be talking about today, the third dividend stock to potentially buy and hold it forever, is going to be Johnson & Johnson, ticker symbol JNJ.

Johnson & Johnson (JNJ): Healthcare and Risks

3:51 And their business today centers on medicine and medical technology after separating from their consumer health It also reached 64 consecutive years of dividend increases in 2026, with an annualized dividend of $5.36 per share. That works out to about a 2% yield at our comparison price, so $1,000 invested represents roughly $20 of annual dividend income. Now, the long-term question, the biggest risk I'd say with Johnson & Johnson, is going to be whether long-term new medical treatments and new medicines that they develop can actually replace the older products they have that have their patents running out.

4:30 There is also the talc litigation, and the wording matters here. The company announced a proposed $5.5 billion resolution in July subject to conditions including participation by at least 95% of the remaining claims. Now, a proposed agreement is not the same as every legal risk for Johnson & Johnson disappearing, so I would just kind of keep an eye on the latest filings for updates about this. For this one, the dividend history is certainly encouraging, but your research has to include the medicine pipeline, the balance sheet, and the remaining legal exposure.

5:04 The fourth company we're talking about today is Chevron, ticker symbol CVX, which produces oil and gas and also participates in operating businesses such as refining.

Chevron (CVX): Energy and Dividend Income

5:15 Its quarterly dividend is $1.78 per share, which annualizes to $7.12 and gives us a yield of about 3.4%. That is roughly $34 a year for every $1,000 invested, but cash supporting that payment can move around much more than the dividend itself. Chevron reported $12.1 billion of earnings in the second quarter of 2026, but a strong energy quarter is a starting point for research rather than a normal year you can assume will repeat. Also, a lot of the success recently has been driven by the Iran war driving up prices of oil.

5:52 The real test is whether Chevron can afford to keep paying the dividend when energy prices are weaker without relying on borrowing or asset sales. Energy adds a different type of business exposure to the list, but it's not going to necessarily be insulated if the stock market starts crashing. The energy stock can fall along with everything else. The fifth and final company on the list is going to be Microsoft, ticker symbol MSFT.

Microsoft (MSFT): Growth and a Smaller Dividend

6:21 And this is going to be the weakest stock for you if your main goal is collecting a large dividend payment right now. It's newly announced quarterly dividend is 98 cents per share, giving it an annualized yield of about 0.8% or roughly $8 a year for every thousand dollars invested. The case for including it is the earnings potential of its software and cloud businesses with a dividend that can grow if the business performs and management continues raising the payment.

Dividend Coverage: Earnings vs. Cash Flow

6:48 But this, my friends, is where you have to be careful because accounting profits and cash to actually distribute to shareholders are two different numbers. Fiscal 2026, Microsoft paid about 26.4 billion dollars in dividends against roughly 133.7 billion in reported net income or about 20%. After subtracting cash purchases of property and equipment from operating cash flow, about 67 billion dollars remained and those same dividends used roughly 39% of that amount.

7:19 This is a simple cash flow calculation and it still leaves other commitments to consider. So, a 20% earnings payout does not establish that Microsoft could comfortably triple its dividend. When considering to buy Microsoft, you should really pay special attention to the return on its AI investment and as always, the price you pay is very important because ultimately the earnings growth could be disappointing based on the current price that you're paying even if that dividend continues to rise.

7:49 Now, let's put the five side by side using $2,000 in each company and the September 18th closing prices.

How Much Dividend Income Does $10,000 Generate?

7:55 At the latest declared dividend rates, Realty Income contributes about 150 dollars a year, Chevron about 68, Coca-Cola about 48, Johnson & Johnson about 40, and Microsoft about 16. Together, that is approximately $287 of annualized dividend income for a starting yield just under 2.9%. That calculation assumes fractional shares and unchanged dividends before taxes and fees. It is not a promise about the payments you'll receive over the next 12 months.

8:30 And although the dollars invested are equal, Realty Income supplies about 40% of the dividend income. So, one company's payment matters much more to your income than the others. Now, I would say just as important as owning the right stocks, it's also about paying the right price.

Why Your Purchase Price Matters

8:45 You could own the right businesses, but still lose in this game of investing if you're buying at the wrong prices. Imagine a company paying $3 a share each year. At a $60 share price, that is a 5% yield, but at a $100, the same dividend gives you only 3%. A lower price helps only business still supports the payment. Sometimes a yield rises because investors correctly expect trouble ahead. You can't just look at the dividend yield, you need to consider what is going to be your total return on investment, so your dividends and the appreciation in share price.

Dividends vs. Total Return

9:19 If a $1,000 investment pays $40 in dividends, but the shares finish worth 850, you have $890 in total, a loss of 11% before taxes and fees. Now, reinvesting those dividends can buy you more shares, but it does not negate the fact that you could potentially be investing in a weakening business. So, the useful takeaway is these stocks serve five different purposes.

Building a Long-Term Dividend Watchlist

9:46 Realty Income is going to emphasize income. You're going to get a high dividend yield, but there's probably not going to be a lot of growth in the share price. Whereas, Microsoft is the exact opposite. It's a compelling growth story that pays a small dividend. Coca-Cola and Johnson & Johnson bring long dividend histories, and Chevron adds energy exposure. But, those descriptions are a way to organize your research rather than ranking guaranteed winners.

10:13 I should also mention that holding just five stocks in a portfolio, you're going to have substantial company-specific risk. So, for a lot of people, it might actually be better just to hold a diversified fund or an index fund. Not everyone is going to want to monitor individual businesses and company-specific risks. For buying, I would look at several years of cash flow, upcoming debt payments, and valuation.

Monitoring Your Stocks and Dividend Taxes

10:38 And I would revisit the thesis when the business changes. For a taxable account, I would pay close attention to the tax treatment. We're not talking about for IRAs here. Dividends from REITs often differ from qualified corporate dividends, and the actual breakdown appears on your tax forms, and it will be a higher rate. I put a lot of my high-dividend paying stocks, particularly my REITs, in IRAs. But, it's going to be different for everybody. The right account is just going to depend on your circumstances.

11:07 And reinvesting a taxable dividend generally is not going to reduce your tax bill. That is how I would use a long-term dividend watch list.

Final Investing Checklist

11:15 Start with the business, check the cash supporting the payment, and decide whether the purchase price makes sense. And if you enjoyed this video, hit like, hit subscribe, and um consider watching this video here about Warren Buffett's top five stocks.