3 Magnificent Dividend Growth Stocks With Yields Above 5% to Buy Now and Hold at Least a Decade

There are many ways to make money on Wall Street, but some methods are a lot more reliable than others. Whether you're looking for a way to raise the stream of passive income your portfolio produces or you simply want to outperform benchmark averages, adding some dividend-paying stocks to your portfolio is a smart way forward.

Companies that commit to returning a portion of their earnings to shareholders behave differently than companies that don't have a dividend program. The differences aren't minor ones either. During the 50 years between 1973 and 2023, the dividend-paying stocks in the S&P 500 index produced a 9.17% average annual return, according to research from Hartford Funds. Non-dividend-paying stocks in the same index produced a paltry 4.27% average annual return over the same time frame.

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As I right this, Realty Income (NYSE: O), Pfizer (NYSE: PFE), and Altria Group (NYSE: MO) offer an average dividend yield of 6.8%. These aren't the fastest-growing payouts you've ever seen but there's a good chance that all three businesses can continue raising distributions for at least another decade.

Realty Income

Realty Income is a net lease real estate investment trust (REIT) that has been increasing its portfolio of commercial real estate since listing on the stock market in 1994. It's raised its monthly dividend payout every quarter of its publicly traded existence and, at recent prices, it offers a huge 5.8% dividend yield.

Realty Income stock has been under pressure because, over the past five years, its dividend payout has increased by just 2.5% annually; earnings growth has been held back because interest rates shot higher in 2022 and 2023.

Realty Income's dividend payout growth has been muted in recent years, but it could pick up the pace in the years ahead. The Federal Reserve lowered interest rates four times in 2024 and further rate cuts are widely expected before the end of 2025.

In addition to potentially lower interest rates in the U.S., Realty Income has an attractive avenue for growth in Europe.

Pfizer

Shares of Pfizer have tumbled about 57% from a peak they set in 2021. The stock has been under pressure due to sales of COVID-19 products that declined sharply in recent years. Investors are also concerned about an upcoming patent cliff for Eliquis, a blood thinner Pfizer markets in collaboration with Bristol Myers Squibb.

At its beaten-down price, Pfizer offers a huge 6.7% dividend yield. Earlier this year, Pfizer raised its dividend payout for the 16th consecutive year and further gains seem likely. The company reported total sales that rose by 7% last year. If we exclude declining sales of COVID-19 products, total revenue surged 12% year over year.

The first generic versions of Eliquis likely won't become available in the U.S. market until 2031. In the meantime, a slew of recently launched cancer treatments could more than offset upcoming Eliquis losses. For example, Pfizer announced this month that the Talapro-2 study proved that adding Talzenna to Xtandi improved prostate cancer patients' chance for long-term survival by 20% compared to Xtandi on its own.

In 2025, Pfizer expects adjusted earnings to come in between $2.80 and $3.00 per share. That's a lot more than it needs to meet a dividend commitment currently set at $1.72 per share. With a high yield upfront and growth drivers to push its needle forward, adding this stock to a diverse portfolio now and holding over the long run looks like a smart move.

Altria Group

Cigarette smoking has been in decline for decades, but that hasn't stopped Altria Group from raising its dividend payout. Last August, the company that markets the Marlboro brand in the U.S. announced its 59th dividend increase in 55 years. At recent prices, the stock offers a juicy 7.7% yield and a pretty good chance for continued payout growth in the years ahead.

Total cigarettes sold in 2024 declined by 10.2%, but the powerful Marlboro brand allowed for rising prices that offset declining volume. Net of excise taxes, smokable product sales fell by just 0.8% year over year in 2024.

While smokable product sales are declining slowly, sales of non-smokable products are driving growth for Altria Group. The company acquired the NJOY brand in 2023 and it's still one of just three e-cigarette brands authorized for sale in the U.S. by the Food and Drug Administration (FDA).

Fourth-quarter NJOY consumables shipped grew 15.3% year over year. Thanks to price hikes on tobacco products and soaring NJOY sales, adjusted earnings grew 3.4% last year.

Management expects to repeat its well-understood playbook and raise adjusted earnings by 2% to 5% in 2025. This probably won't be the fastest-growing dividend payout in your portfolio, but growth at a pace that exceeds inflation seems likely. Adding some shares to a portfolio now to hold over the long run is probably the right move.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb, Pfizer, and Realty Income. The Motley Fool has a disclosure policy.