2 Top Dividend Stocks to Buy in December

With just a month left to the year, the S&P 500 is up 26% in 2024. Unless there's some major news over the next few weeks, the year will close out with a strong gain. Can it continue into 2025? There are indications that it can, such as an improving retail landscape and falling interest rates -- and there are indications that it can't, such as historically high valuations.

What should investors do? One thing you can do when it's unclear what's going to happen next (which is basically all the time) is make sure you have a few stable dividend stocks to protect your portfolio. If you need some new ones, consider Agree Realty (NYSE: ADC) and Ally Financial (NYSE: ALLY).

1. The new monthly dividend company

Agree Realty is a real estate investment trust (REIT). REITs are excellent dividend stocks in general because they pay out 90% of earnings as dividends. However, like all dividend stocks, REITs vary in yield and predictability. Agree is an excellent choice for a REIT because it has a high yield -- 3.9% at the current price -- and it has a stable and growing business.

Agree switched from a quarterly dividend to a monthly dividend in 2021. In many ways, Agree is very similar to top REIT Realty Income, which calls itself "The Monthly Dividend Company." Agree is also a retail REIT, and it has a long list of quality tenants like Walmart and Tractor Supply. Its top industry is grocery stores, which account for 9.4% of leases, and other top industries include resilient businesses like tire companies, convenience stores, and home improvement shops.

But Agree might appeal to many investors because it's a much smaller company, and it has lots of room to run. It owns 2,271 properties in 49 states, which puts it on the small side. It has $2.3 billion in cash to invest in new properties, and it's guiding for $850 million in acquisitions for 2024. It's also tuned into retail shopping trends and is focused on omnichannel retailers, which positions it for future growth. It has identified more than 168,000 properties that fit its investing model, and it's targeting large, established companies in resilient industries.

Even though it's small and growing, it already has a strong track record demonstrating a commitment to its dividend. It has raised its dividend for the past 12 years, which isn't as long as some dividend superstars, but as it expands and becomes more stable, it has leaned into increasing the dividend, and investors can rely on it for steady, and monthly, passive income.

2. The small-but-growing bank

Ally isn't one of the biggest banks in the U.S., but people are getting to know it. For starters, it's the largest all-digital bank in the country, drawing hundreds of thousands of new customers all the time. Next, it has the largest prime auto loan business in the country. And finally, it's a Buffett stock, which always brings attention.

There are several reasons to be excited about Ally stock. First, it's not one of the largest banks, but it's growing. It has 3.3 million retail deposit customers as of the end of the third quarter, up from 3 million at the start of the year. Performance has been under pressure with high interest rates, but the growth in customer count implies that it has an attractive platform with future potential.

It has a long history as the financial segment of General Motors, so it's not a bet on a new, unprofitable venture. Along with its opportunities, that's a compelling mix. Ally stock tanked earlier this year because auto loan defaults were worse than expected, but it has taken on a more stringent approach to approvals and curtailed its approval rate.

Next, it pays a growing dividend that yields 3% at the current price. That's higher than most bank stocks, and the only bank stocks that do better than that are typically struggling.

Finally, it's quite cheap. Ally stock trades at only 9 times its forward one-year earnings, which is super cheap, even for a bank stock. It also trades at less than 1 times book value, which again, is cheaper than most bank stocks.

Ally should benefit from lower interest rates, and it's not likely to stay this cheap for long. At this price, it's an excellent buy-and-hold dividend stock candidate.

Don’t miss this second chance at a potentially lucrative opportunity

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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 25, 2024

Ally is an advertising partner of Motley Fool Money. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tractor Supply and Walmart. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.