Treasury Yields Rise: Do High-Quality Dividend Stocks Still Reign Supreme?

The recent surge in 10-year Treasury yields to 5% has created a new passive income opportunity for investors, but history suggests that high-quality S&P 500 dividend stocks may still offer better returns. Three such stocks are Coca-Cola, Realty Income, and BlackRock.

Coca-Cola is a well-known beverage company with a proven track record of increasing its dividend payments every year for the past 64 years, making it a Dividend King. While its forward dividend yield is relatively low at 2.4%, the stock's payout has grown significantly over the past decade, providing an inflation-beating annualized growth rate of 4.2%. A $10,000 investment in Coca-Cola in 2016 would have generated about $330 in dividend income that year and would now produce around $500 annually.

Realty Income is a real estate investment trust with a high forward dividend yield of 5.8% and a history of annual dividend increases for the past 31 years. Its specialty is brick-and-mortar retail, with top tenants including Dollar General, 7-Eleven, Walmart, and FedEx. The company distributes its dividends monthly, aligning with how most people pay their bills.

BlackRock is an investment management giant with a persistent record of dividend growth, increasing its payout every year for the past 16 years. While its forward dividend yield is only 2.2%, the stock has delivered respectable long-term price appreciation and could generate around $550 in annual dividend income in 10 years.