3 Top Dividend Stocks to Buy and Hold Forever

The S&P 500 is up 56% since the end of 2022. The bull market could deliver several more years of great returns, but history shows us the market will have ups and downs. When those down years come, it can be comforting to have a portfolio full of businesses that pay consistent dividends to their shareholders.

To help you build a steady flow of passive income, three Motley Fool contributors have selected three industry-leading businesses that could pay you extra cash for the rest of your life. Here's why they like Coca-Cola (NYSE: KO), Home Depot (NYSE: HD), and Realty Income (NYSE: O).

An all-weather investment

John Ballard (Coca-Cola): Coca-Cola has paid a growing dividend for 62 years, making it one of the most time-tested dividend investments for the long haul. Right now is a great time to consider buying shares, with the recent sell-off pushing the stock's forward dividend yield back to around 3% at the time of writing, or more than double the S&P 500 average yield.

The stock is down after Coke posted a slight decline in unit case volume in the third quarter. This followed solid growth in Q2, when unit case volume grew 2% year over year. Consumer spending trends have been somewhat unpredictable this year, which is impacting many consumer brands, but Coke continues to invest for long-term growth.

Importantly, management is prioritizing investments in higher growth products and trimming capital spending in areas that are not producing satisfactory returns. Management said its return on invested capital improved five points over the last three years to 24%.

The company's core brand requires little capital since it manufactures concentrate syrup that is used by its bottling partners to create the finished product. This high-margin business is why Coca-Cola has been a longtime favorite of Warren Buffett and could be rewarding for your portfolio, too.

Coca-Cola is currently paying out 68% of its full-year adjusted earnings in dividends. The high yield, combined with the company's ability to find ways to keep growing revenue and earnings through innovation and new marketing strategies, should drive solid returns for investors.

A dividend growth champ

Jeremy Bowman (Home Depot): Home Depot is one the most valuable retailers in the world. It's built a home improvement retail empire with a relatively simple business model: filling cavernous stores with a wide selection of all manner of home improvement products and offering competitive prices.

That's made Home Depot one of the best-performing stocks of all time, and it's also established itself as a rewarding dividend stock for investors. While Home Depot hasn't raised its dividend as consistently as its rival, Lowe's Companies, over its history, it has the edge over Lowe's in dividend yield, with 2.1% compared to Lowe's 1.7%.

Home Depot has also been a solid dividend grower. The company has raised its dividend payout by 7.5% or more every year since 2011, and it's due for another raise. The retailer's last dividend hike was lower than its recent historical pattern due to the housing downturn, but the next one should give investors a sense of management's current outlook.

Home Depot has faced headwinds from the slowdown in the housing market, as comparable sales have fallen over the last several quarters. However, the company should eventually bounce back. The housing market should strengthen as interest rates come down and existing home sales return to their historical average.

Meanwhile, Home Depot looks prepared to take advantage of the recovery after its $18 billion acquisition of SRS Distribution earlier this year, giving it ownership of a leading building supply distributor and strengthening its reach into the pro market.

Looking ahead, Home Depot has the competitive advantages to continue outperforming the market over the long term, and it's well positioned to benefit from the recovery in the housing market.

A top dividend stock plus monthly payments

Jennifer Saibil (Realty Income): Realty Income is a real estate investment trust (REIT), a type of structure where a company pays out 90% of its earnings as dividends. In general, they make great dividend stocks.

But not all REITs are created equal. Some are quite risky, and others' yields are mediocre. Realty Income has a stable and growing business, and its dividend yield is 5.3% at the current price. That's already impressive, but when you throw in monthly dividend payments, you have a standout dividend stock.

It has paid a monthly dividend for 653 months, which works out to more than 50 years. That's incredibly reliable. It has increased the dividend for 108 consecutive quarters. It has a strong cash position and a long pipeline of quality properties to buy and keep growing, and it has made several major acquisitions over the past few years to fortify its business as a top global REIT. It's now the seventh-largest REIT in the world, but it still has plenty of opportunity to grow.

Almost 80% of its properties are still retail, and nearly 20% of those are in grocery and convenience stores, the types of industries that are generally resilient when there's macroeconomic uncertainty. Some of its top clients include names like Home Depot and CVS. It boasts a 98.7% occupancy rate, and that hasn't changed much over the years, even during the pandemic when other REITs were worried about rent payments.

Some of its newer properties are in other areas, such as gaming and industrials. Wynn Resorts, for example, is already one of its top 10 tenants. While these aren't in the same essentials categories as its older tenants, they provide the benefit of diversification.

Any investor looking for a solid, growing dividend stock that they can rely on for passive income with a high yield should consider Realty Income.

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Jennifer Saibil has no position in any of the stocks mentioned. Jeremy Bowman has no position in any of the stocks mentioned. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot and Realty Income. The Motley Fool recommends CVS Health and Lowe's Companies. The Motley Fool has a disclosure policy.