2 Surefire Dividend Stocks to Buy for the Long Haul

As interest rates decline, income investors are anticipated to reallocate capital into blue-chip dividend stocks, favoring companies with strong fundamentals. The article spotlights AT&T and Vici Properties as compelling options. AT&T offers a 4.3% dividend yield, supported by a simplified business focused on 5G and fiber growth, and robust free cash flow, trading at a low valuation. Vici Properties, an experiential REIT, provides a 5.8% yield, underpinned by stable, CPI-indexed long-term leases with major gaming operators, 100% occupancy, and strong AFFO growth, with potential tailwinds from declining interest rates.

Analysis

As interest rates decline, income investors are anticipated to rotate capital from risk-free assets back into blue-chip dividend stocks, prioritizing companies with wide moats, stable profits, and reasonable payout ratios. This shift creates opportunities for well-positioned dividend-paying entities.

AT&T (T) has strategically divested media assets to focus on its higher-growth 5G wireless and fiber segments, reporting 1.7 million wireless postpaid subscribers in both 2023 and 2024, and 1.1 million and 1 million fiber connections respectively. The company's free cash flow (FCF) grew 18% to $16.8 billion in 2023 and 5% to $17.6 billion in 2024, comfortably covering its $8.1-$8.2 billion dividend payments. Despite an expected FCF dip in 2025 due to investments, its 4.3% forward dividend yield, exceeding the 10-Year Treasury's 4%, and a valuation of less than 7x this year's adjusted EBITDA, supported by a 3% adjusted EBITDA CAGR (2024-2027), suggest limited downside.

Vici Properties (VICI), an experiential REIT, demonstrates a robust business model with 100% occupancy since its 2018 IPO, underpinned by long-term, CPI-indexed leases with major gaming tenants. The company, obligated to pay out at least 90% of pre-tax profits as dividends, offers a high 5.8% forward yield. Vici projects a 4%-6% rise in adjusted funds from operations (AFFO) per share for 2025 to $2.35-$2.37, easily covering its $1.73 per share dividend rate, and trades at an attractive 13x this year's AFFO per share. Declining interest rates are expected to facilitate cheaper property acquisitions and a warmer macro environment should benefit its gaming tenants.

Key Decisions for Investors

• Consider increasing exposure to high-quality dividend stocks as interest rates decline, focusing on companies with sustainable payouts and strong underlying fundamentals.
• Evaluate AT&T (T) for its attractive 4.3% forward dividend yield, supported by a simplified business model, consistent subscriber growth in core segments, and robust free cash flow generation.
• Assess Vici Properties (VICI) for its compelling 5.8% forward yield, derived from a resilient REIT structure with 100% occupancy, inflation-linked leases, and strong AFFO growth, which could benefit from a declining interest rate environment.