3 Magnificent S&P 500 Dividend Stocks Down 19% to 28% to Buy and Hold Forever

The article identifies three S&P 500 dividend stocks—Realty Income (O), Chevron (CVX), and American Water Works (AWK)—as compelling long-term investment opportunities, noting all are trading significantly below their all-time highs. Realty Income offers a 5.4% yield and 31 years of monthly dividend increases, while Chevron, bolstered by its Hess acquisition, projects $12.5 billion in incremental free cash flow and has increased dividends for 37 consecutive years, yielding 4.4%. American Water Works, a regulated utility, provides a 2.3% yield with 17 years of dividend growth, targeting 7-9% annual EPS and dividend growth through 2034, underscoring their resilient business models for income-focused portfolios.

Analysis

The article highlights three S&P 500 dividend stocks—Realty Income (O), Chevron (CVX), and American Water Works (AWK)—as compelling long-term opportunities, all currently trading significantly below their all-time highs. This selection emphasizes the historical contribution of dividends, which have accounted for nearly 31% of the S&P 500's total returns since 1926. The analysis suggests these companies offer robust dividend growth and resilient business models.

Realty Income, a REIT, offers a 5.4% yield and has increased its monthly dividend for 31 consecutive years at a 4.2% CAGR, demonstrating resilience in high-interest environments due to its diversified, triple-net lease portfolio. Chevron, yielding 4.4%, projects $12.5 billion in incremental free cash flow between 2024 and 2026 following its Hess acquisition, extending its 37-year dividend growth streak. Both are presented as undervalued, trading 28% and 19% below their respective all-time highs.

American Water Works, a regulated utility, provides a 2.3% yield and has consistently grown its dividend for 17 years, supported by steady cash flows and state-approved rate increases. The company targets an impressive 7-9% CAGR for EPS and dividends through 2034, alongside significant infrastructure spending. This regulated business model offers stability and predictable growth, making it an attractive option for long-term income investors.

Key Decisions for Investors

• Consider initiating or increasing positions in Realty Income (O), Chevron (CVX), and American Water Works (AWK) for long-term income and total return potential, particularly given their current discounts from all-time highs.
• Monitor Chevron's upcoming Investor Day on November 12 for updated long-term financial goals and cash flow projections post-Hess acquisition, which could further clarify dividend growth prospects.
• Evaluate the resilience of Realty Income's diversified portfolio and American Water Works' regulated business model as defensive plays against market volatility and interest rate fluctuations.