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3 Best Dividend Stocks to Buy With $1,000

It's always a great time to set money aside for the future, and you don't need a ton of money to have a meaningful impact down the road -- especially if you invest wisely. Even a $1,000 investment could compound into more than $17,000 in 30 years if it just matches the stock market's historic rate of return. So just imagine what it could do if your investments do even better.

With that in mind, here are three great stocks for growth and income, all of which I own in my portfolio, and all of which have the potential to beat the market over time.

Image source: Getty Images.

1. Realty Income: The best overall dividend stock in the market?

I've called Realty Income (NYSE: O) the best overall dividend stock in the market, and I truly believe it's worthy of such a title. Not only has the company produced an incredible 15.1% annualized return since its 1994 NYSE listing, it has also increased its dividend for 97 consecutive quarters and has made 617 consecutive monthly dividend payments (that's more than 51 years).

If you aren't familiar, Realty Income is a real estate investment trust, or REIT, that invests in single-tenant properties. The bulk of the more than 11,000 properties in its portfolio are retail in nature, but don't let this scare you. Realty Income's tenants are mostly engaged in businesses that are resistant to e-commerce disruption as well as recessions. Discount-oriented stores like dollar stores, service businesses like restaurants, and nondiscretionary retailers like convenience stores are just a few examples.

In a nutshell, Realty Income is set up to be a fantastic long-term compounding machine and has a long track record of delivering for its investors. In fact, a $1,000 investment in Realty Income at the time of its 1994 NYSE listing would be worth more than $50,000 today with dividends reinvested. This was the very first REIT I ever bought, and it remains a staple of my portfolio.

2. American Campus Communities: A resilient business with excellent tailwinds

American Campus Communities (NYSE: ACC) is also a REIT, this time with a focus on the student housing industry. Not only did this founder-led business pioneer the purpose-built student housing industry in the 1990s, but it also has an impressive track record of delivering market-beating returns for investors.

The company is currently the largest owner, developer, and manager of student housing in the United States, with 166 properties and nearly 112,000 rentable bedrooms. But it could be just scratching the surface. American Campus Communities currently has just 1.5% of the 7.1 million students at its target universities, and the bulk of students still live in traditional (and outdated) on-campus housing or off-campus apartment complexes.

What's more, American Campus Communities is ramping up its on-campus development, where it builds and manages properties in partnership with universities, which creates a more asset-light revenue stream. With the least new supply of student housing coming onto the market in 2022 in more than a decade, paired with a surge in college applications, American Campus Communities could be set for some excellent years ahead of it.

3. Bank of America: Don't sleep on this bank stock

Bank of America (NYSE: BAC) has certainly come a long way since the financial crisis started 14 years ago. The bank's asset quality has improved, and management has prioritized efficiency and technology. And now, Bank of America is truly one of the top U.S. banks, but with a considerably lower valuation than some of its peers.

In addition, Bank of America could be an especially well-positioned bank stock right now, as inflation and rising rates could cause profits to soar in the next few years. The Federal Reserve is widely expected to start raising benchmark interest rates in 2022, which generally translates to higher interest rates on bank loans. And with a higher proportion of noninterest-bearing deposits than most of its peers, Bank of America could be one of the biggest beneficiaries.

Buy for the long term

To be perfectly clear, I own all three of these stocks in my own portfolio because I feel they have a great chance of beating the market over the long run. I have no idea what they could do in the short term, and all three will almost certainly have their ups and downs over shorter time spans. However, if your investment goals involve a combination of growth and income and you measure your returns in multiyear periods, these three dividend stocks could be great additions to your portfolio.

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*Stock Advisor returns as of December 16, 2021

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Matthew Frankel, CFP® owns American Campus Communities, Bank of America, and Realty Income. The Motley Fool owns and recommends American Campus Communities. The Motley Fool has a disclosure policy.


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