Realty Income, Ares Capital, and Energy Transfer could be great income plays.
Over the past three years, high interest rates have driven many investors from dividend stocks toward risk-free CDs and Treasury bills with higher yields.
But as interest rates decline again, those income-seeking investors will ly pivot back toward high-dividend stocks.
Instead of bouncing between fixed-income investments and dividend stocks, it might be smarter to simply buy a few reliable dividend plays and hold them over the next few decades.
Here are three income stocks I would personally hold for the next 30 years: Realty Income (O -0. 99%), Ares Capital (ARCC 0. 45%), and Energy Transfer (ET -0. Image source: Getty Images.
Realty Income Realty Income is one of the world's largest real estate investment trusts (REITs).
From 2020 to 2024, it more than doubled its foot to over 15,600 perties for nearly 1,600 tenants in the U. , and Europe through its mergers with VEREIT and Spirit Realty.
As a REIT, it rents out its perties to es and splits the rental income with its investors.
It needs to distribute at least 90% of its pretax income to its investors as dividends to maintain a favorable tax rate. It currently offers a high forward yield of 5.
6%, it pays its dividend monthly, and it has raised it 131 times since its initial public offering in 1994. Last year, its adjusted funds from operations (AFFO) of $4. 19 per easily covered its $3.
17 in annual dividends. The REIT's tenants are diversified across 89 different industries, and it prefers to work with recession-resistant es convenience stores, discount retailers, and drugstores.
It has kept its occupancy rate above 96% ever since its public debut, even as its tenants endured three major recessions (the dot-com bust, the Great Recession, and the coronavirus decline).
Realty Income's diversification, scale, and resilience make it a great long-term income investment. At $58, it still looks a bargain at less than 14 times its jected AFFO per for 2025.
Ares Capital Ares Capital is the world's largest development company (BDC).
As such, it vides financing to so-called "middle market" companies, which often struggle to secure financing from traditional banks because they are considered higher-risk clients.
Also, these companies are often too small to attract investments from private equity firms. REITs, BDCs must pay out at least 90% of their pre-tax income as dividends to maintain their special tax.
Ares aims to invest $30 million to $500 million in debt and equity per client, and it looks for es that generate $10 million to $250 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) annually.
In exchange for taking on more risk, Ares charges higher interest rates than traditional banks.
To keep growing, Ares needs interest rates to stay in a "goldilocks zone"; high interest rates will choke its clients, while low interest rates will reduce its income.
That strategy seems risky, but it diversifies its investments across 566 companies backed by 245 different private equity sponsors in its $27. 1 billion portfolio. Ares allocates 58.
6% of that portfolio to first-lien secured loans, 5. 7% to second-lien secured loans, and 5% to senior subordinated debt -- which all put it ahead of other creditors in case its clients go bankrupt.
Ares pays a hefty forward dividend yield of 8. 7%, and its jected EPS of $2. 02 per for 2025 will comfortably cover its forward annual dividend rate of $1.
At $22, it looks cheap at just 11 times that forward estimate.
Energy Transfer Energy Transfer is a mid company, which vides pipelines, storage, and services at terminals for natural gas, natural gas liquids, crude oil, and other refined ducts.
It operates over 135,000 miles of pipeline across 44 states, and it runs a "toll road" model by charging up and down companies to use its infrastructure.
With that stable model, it doesn't need to fret over volatile oil and gas prices; it can generate stable fits as long as its customers keep using its pipelines.
And it operates as a master limited partnership (MLP), which blends the tax advantages of a private partnership with the liquidity of a publicly traded stock.
MLPs, REITs and BDCs, aim to pay out most of their fits as distributions. However, MLPs aren't required to pay out more than 90% of their pretax income to maintain a lower tax rate.
Energy Transfer pays a high forward yield of 7. For 2025, analysts expect its earnings per unit (i. , ) to increase 9% to $1. 40 and easily cover its forward distribution rate of $1. 31 per unit.
At $18, it trades at just 14 times that estimate.
So if you're looking for a boring high-yield pipeline play that can generate stable income for decades, I believe Energy Transfer checks all the right boxes.
Leo Sun has positions in Energy Transfer and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.