Key Points

Dividend King Hormel is deeply out of favor, but it has an important trick up its sleeve. Realty Income is the largest net lease REIT and has three decades of dividend growth behind it. Midstream giant Enterprise Products Partners has a big yield and plans for more distribution growth.

If you are looking for dividend stocks in today's market, you need to be selective. Given that the average stock in the S&P 500(SNPINDEX: ^GSPC) is offering a paltry 1.3% yield, you can easily find higher-yielding investments. But finding high yields from companies you'd want to hold onto for a decade requires deeper consideration.

If your holding period is 10 years or longer, you'll find Hormel(NYSE: HRL), Realty Income(NYSE: O), and Enterprise Products Partners(NYSE: EPD) all worth a closer look today. Here's why.

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1. Hormel is painfully out of favor

Hormel's dividend yield is around 3.8%, which is nearly three times the level of the S&P 500 index. It also happens to be near the highest levels in the food maker's history. That said, with a market cap of $16 billion, Hormel is nowhere near the largest food company around. Where it stands toe to toe with the industry giants is its status as a Dividend King, which is a monster-sized achievement.

Hormel has issues to deal with, which is why the yield is so high today. Investors are worried that the future won't be as bright as the past. However, Hormel has an ace in the hole when it comes to dealing with adversity. The not-for-profit Hormel Foundation controls nearly 47% of the company's voting shares. The Hormel Foundation uses the dividends it collects from Hormel to fund its philanthropic efforts, so it has a long-term view that emphasizes conservatism and dividends.

In other words, this food maker doesn't have to make questionable short-term decisions to appease Wall Street. It can take its time and make decisions that will support long-term dividend growth. If that's what you are looking for, you might want to invest alongside The Hormel Foundation and buy Hormel Foods.Image source: Getty Images.

2. Realty Income is the 800-pound, net-lease gorilla

Real estate investment trust (REIT) Realty Income has a dividend yield of 5.5%. The dividend has been increased annually for 30 consecutive years. It is a bit of a slow and steady tortoise, with dividend growth over that span coming in at around 4% a year, annualized. However, that is slightly faster than the long-term growth rate of inflation, so the buying power of the monthly dividend has grown steadily over time.

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What sets Realty Income apart is its size and diversification. It is, by far, the largest net lease REIT, which means that it owns single-tenant properties for which the tenant is responsible for most property-level expenses. It is a fairly low-risk model across a large portfolio. Realty Income owns over 15,600 properties in the United States and Europe. While the company's vast scale suggests that growth will remain slow, its size also provides it with advantageous access to capital markets and gives it the ability to take on deals (including buying its smaller peers) that competitors can't. If you want reliable income for the next decade, net lease giant Realty Income should be on your short list.

3. Enterprise Products Partners plays with the big boys

Last up is Enterprise Products Partners, a midstream master limited partnership (MLP) with a huge 7.1% distribution yield. The distribution has been increased year in and year out for 26 consecutive years. Like Realty Income, Enterprise isn't going to wow you with growth, but it has proven to be reliable and has shown that it can change along with the industry in which it operates.

That's notable because growth via ground-up construction was the main focus up until 2016, fueled by frequent sales of MLP units. The goal now, however, is slow and steady growth fueled by internal investment projects funded with internally generated cash. Which is why Enterprise has gone from having its distribution covered by distributable cash flow by 1.2x in 2016 to 1.7x in 2024. That monster coverage ratio gives it both the leeway to put cash toward its capital investments and provides it with a backstop for the distribution, should adversity strike.

Monster options for your dividend portfolio

Hormel, Realty Income, and Enterprise are monsters in their own unique ways. The riskiest choice here is probably Hormel, which is deeply out of favor on Wall Street today. Realty Income and Enterprise, meanwhile, will likely appeal to even the most conservative investors. But all three are dividend stocks worth buying today and holding onto for a decade, or more.

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Reuben Gregg Brewer has positions in Hormel Foods and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

3 Monster Dividend Stocks to Hold for the Next 10 Years was originally published by The Motley Fool

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