The Ultimate Dividend Stock to Buy for a Lifetime of Passive Income

There are a lot of great dividend stocks. Many companies offer higher-yielding payouts, which have steadily increased over the years.

However, few companies can match the combination of yield, payment frequency, and growth consistency of Realty Income (NYSE: O). These and other factors make it the ultimate dividend stock to buy for those seeking a passive income stream that should last their lifetime.

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A high-quality, high-yielding payout

Realty Income pays a very attractive dividend. The real estate investment trust (REIT) currently has a dividend yield of around 5.7%. That's several times higher than the S&P 500, which currently yields around 1.3%. Even better, Realty Income pays dividends each month, which is much more frequent than the quarterly cadence of most dividend stocks.

While higher-yielding dividends are often at a higher risk of a future reduction, there's a very low risk that Realty Income might need to reduce its payment. The REIT has a high-quality portfolio and a top-tier balance sheet.

Realty Income currently owns a globally diversified portfolio of over 15,600 properties in eight countries net leased to 1,565 clients in 89 industries. Those net leases provide very stable rental income because tenants cover all operating costs, including routine maintenance, real estate taxes, and building insurance. Meanwhile, its tenants are many of the world's leading companies like 7-Eleven, FedEx, and Walmart. It focuses on owning properties leased to high-quality tenants in durable industries (91% of its rent is resilient to economic downturns and isolated from the pressures of e-commerce). Finally, the REIT's diversification (by tenant, geography, and property type) helps further reduce risk.

The REIT also has a very conservative financial profile. Its dividend payout was less than 75% of its adjusted funds from operations (FFO) last year. That gives it a big cushion while allowing it to retain substantial free cash flow to fund new investments (nearly $930 million last year). Meanwhile, Realty Income is one of only eight REITs in the S&P 500 with two bond ratings of A3/A- or better.

This combination of factors puts Realty Income's high-yielding dividend on a very sustainable long-term foundation.

A long record of growth that should continue

Realty Income has one of the most consistent records of growth you'll find. Since coming public in 1994, the REIT has increased its adjusted FFO per share every single year except one (2009 during the financial crisis). Overall, it has grown its adjusted FFO per share at a 5% compound annual rate over the last 30 years.

The REIT's steadily rising income has enabled it to routinely increase its dividend. It has hiked its payment 130 times since going public. It currently has unbroken streaks of 30 straight years and 110 consecutive quarters of increasing its dividend. Realty Income has grown its dividend at a 4.3% compound annual rate over the past three decades.

Realty Income has grown into the seventh-largest REIT in the world, with over $58 billion of real estate. However, it has plenty of room to continue expanding.

The company estimates that the total addressable market for net lease real estate in the U.S. is $5.4 trillion. Meanwhile, it sees another $8.5 trillion potential market opportunity for net lease real estate in Europe. That opportunity set has expanded as the REIT has added new property verticals. For example, it has recently started investing in data center development projects and gaming properties, adding $700 billion of potential future investment opportunities. It has also expanded into several new European countries, opening the doors to trillions of dollars of future investment opportunities.

Realty Income has also added new investment platforms to enhance its ability to continue investing. It established a credit investment platform, which has provided additional income-generating real estate investment opportunities. It has also launched a private capital fund management business to tap into the $18.8 trillion U.S. private real estate sector.

With a sound financial profile and ample room to continue expanding, Realty Income has a very long runway to continue growing its dividend.

Built to produce durable and growing passive income

Realty Income pays a high-yielding monthly dividend that it has routinely increased over the decades. That payout should continue to head higher in the future thanks to the REIT's durable cash flows, strong financial profile, and robust growth prospects. This combination of characteristics makes it the ultimate dividend stock to buy for a lifetime of passive income.

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Matt DiLallo has positions in FedEx and Realty Income. The Motley Fool has positions in and recommends FedEx, Realty Income, and Walmart. The Motley Fool has a disclosure policy.