Want Decades of Passive Income? 2 Stocks to Buy Now and Hold Forever.

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A high yield alone isn’t always a good indication of the attractiveness of an income investment. Very often, a high yield is a sign that Wall Street is worried about a company’s future. This is why investors looking for decades of passive income need to step back and assess more than just dividend yield.

Right now, Realty Income (NYSE: O) and Toronto-Dominion Bank (NYSE: TD) are both offering attractive yields. Here’s a quick look at the businesses that back their above-average yields.

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When it comes to dividend stocks, real estate investment trust (REIT) Realty Income is a total snooze fest. That’s great news if you’re looking for a company to own for decades, especially given that it offers a hefty 5.5% dividend yield. That’s well above the REIT industry average of roughly 3.9%, using the Vanguard Real Estate Index ETF as an industry proxy.

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Realty Income has increased its dividend annually for 30 consecutive years, and its balance sheet is investment-grade rated. It’s the largest net lease REIT (meaning tenants pay most properly-level operating costs) you can buy and one of the largest REITs of any kind.

The REIT has an incredibly diverse portfolio, with roughly 15,400 properties spread throughout North America and Europe. Although it has a heavy focus on retail (about 73% of rents), it also has exposure to industrial assets (17%) and some unique properties that fall into the “other” category (10%), like vineyards and casinos.

Why is the yield so high? Realty Income is so large, that slow and steady growth is probably the best you can expect. Think low- to mid-single-digit percentage dividend growth, which is basically what has happened over the past three decades.

However, if the REIT can continue to increase its dividend in the 4% range over time, the return will still be very attractive, given the dividend yield. (Put the two together and you get an annual return of about 9.5%.) And 4% dividend growth is above the historical growth rate of inflation, which is closer to 3%, so the buying power of the dividend has increased over time.

You won’t brag about Realty Income at cocktail parties, but you’ll probably be glad you own it, just the same.

The big attraction of Toronto-Dominion Bank, usually referred to as TD Bank, is its yield. At about 5.2%, the yield is more than twice the 2.4% yield you’d collect from the average bank, using the SPDR S&P Bank ETF as an industry proxy. There are a lot of things to like about TD Bank, too.

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