4 Income-Generating Stocks to Hold Long-Term: How Dividends Impact Your Balance Sheet

Understanding Dividend Stocks and Financial Statements

Dividend stocks represent an often-overlooked path to building sustainable investment income. When companies distribute cash to shareholders, these payouts appear in your investment account as received income, but the accounting treatment on the corporate balance sheet tells an important story: dividends reduce retained earnings while reflecting the company’s financial health and cash generation capability. Understanding this relationship helps investors distinguish between companies that pay dividends from cash flow versus those stretching their finances.

If you’re sitting on $2,000 and wondering where to deploy it for the next five years, dividend-paying equities deserve serious consideration, particularly if you’re targeting passive income. Let’s examine four established companies with proven track records of returning cash to shareholders.

1. Realty Income (O): The Monthly Dividend Powerhouse

Realty Income stands out with an exceptional distribution model—it’s paid monthly dividends for 665 consecutive periods and raised payouts 112 times over 31 consecutive years. At approximately 5.7% yield, it significantly outperforms broader market averages.

The company operates single-tenant commercial properties under triple-net lease agreements, meaning tenants absorb most operational costs. This structure creates predictable cash flows. More than 90% of rental income derives from recession-resistant businesses: grocery retailers, discount stores, and logistics hubs. No single tenant exceeds 3.3% of annual rent exposure.

Recent performance supports this stability. Q3 showed $1.47 billion in revenue (+11% year-over-year), with adjusted FFO reaching $1.08 per share against $1.05 in the prior year period. Portfolio occupancy held steady at 98.7%. With a 75% payout ratio relative to adjusted FFO, management retains sufficient capital for new acquisitions while sustaining distribution growth.

On your balance sheet as an investor, these regular monthly distributions become recurring income entries, strengthening your cash position without forcing share sales during market volatility.

2. Home Depot (HD): Steady Growth Despite Market Headwinds

Home Depot, the world’s leading home improvement retailer, has increased dividends for 16 straight years, currently yielding 2.7%. The company serves two customer segments: retail homeowners and professional contractors—a dual revenue model that provides diversification.

The 2025 acquisition of GMS through subsidiary SRS Distribution significantly broadens specialty building products capabilities. Q3 results included $41.4 billion in total sales (+2.8% year-over-year), with $900 million contributed by the newly integrated GMS division. Despite housing market softness, net earnings reached $3.6 billion with sustainable 62% payout ratios.

Economists anticipate housing market improvement as interest rate environments normalize and demographic shifts favor home ownership. When that recovery arrives, Home Depot’s margins and cash generation should expand accordingly. Meanwhile, the reliable dividend stream provides steady income that compounds over your five-year holding period, with distributions flowing into your investment account as balance sheet earnings you retain.

3. Johnson & Johnson (JNJ): The Defensive Healthcare Giant

Johnson & Johnson has elevated payouts for 63 unbroken years, earning Dividend King status. The healthcare conglomerate boasts AAA credit ratings and generates over $20 billion in annual free cash flow—providing substantial safety margins for distributions and business reinvestment.

The company’s balanced approach to cost management means it can weather macroeconomic turbulence. Demand for pharmaceuticals and medical devices remains steady regardless of economic cycles. Key products—Darzalex (multiple myeloma), Stelara (psoriasis/Crohn’s), and Carvykti (multiple myeloma)—serve high-value therapeutic areas.

Q3 2025 delivered 7% sales growth to $24 billion with adjusted EPS rising 16% year-over-year to $2.80. Despite handling talc litigation, patent expirations, and tariff pressures, JNJ maintains approximately 50% payout ratios, preserving earnings for reinvestment and strategic acquisitions. Your dividend payments appear as income on your personal financial statements, part of the total return alongside price appreciation.

Current yield stands near 2.6%—more than double the S&P 500 average.

4. Pfizer (PFE): Transformation Through Pipeline Investment

Pfizer maintains 348 consecutive quarterly dividend payments with 16 straight years of increases, offering approximately 7% forward yield—substantially above market averages.

The pharmaceutical leader faces near-term headwinds from COVID-19 demand normalization and patent expirations, but management targets over $7 billion in cost savings by 2027 to offset this transition. The company deployed $7.3 billion in cash dividends during the first nine months of 2025 alone, demonstrating robust cash generation.

Strategic acquisitions strengthen Pfizer’s moat. The Seagen acquisition bolstered oncology capabilities with multiple approved therapies and pipeline candidates potentially becoming blockbusters by 2030. Metsera’s entry into the GLP-1 weight loss space positions Pfizer in a high-growth category. Q3 delivered $45 billion revenue with $9.4 billion net income (up 24% year-over-year).

The pharmaceutical sector’s defensive characteristics—demand persists through economic downturns—make it appealing for income investors. Pfizer’s dividend sustainability sits on a foundation of predictable cash flows that show up as operating profit on corporate filings.

Five-Year Outlook: Building Your Income Stream

These four holdings represent different sectors—real estate, retail, healthcare services, and pharmaceuticals—yet share common attributes: consistent dividend growth, healthy balance sheet positions, and management discipline regarding payout ratios.

Over five years, reinvesting distributions compounds your returns while your initial $2,000 generates meaningful passive income. As companies expand profits, they typically raise dividends, helping your income pace match or exceed inflation. During market pullbacks, dividend stability provides psychological and financial buffers.

Before committing capital, ensure these holdings align with your risk tolerance and time horizon. Dividend stocks require patience, but they’ve rewarded long-term investors across multiple market cycles.