If you have a smaller investment portfolio, it’s hard to get excited about dividend stocks. An extra 6% a year doesn’t feel impactful when it is calculated against a small base. However, as your wealth grows, the dynamic switches, and compounding dividends start to look like an infinite money glitch.

For example, with $50,000 invested, a 6% yield gives you an extra $3,000 a year. With $1 million, it provides you $60,000 in annual passive income, which is more than the U.S. median income.

Let’s explore some reasons why buying shares in Realty Income Corp. (O 0.32%) or Alpine Income Property Trust (PINE +1.67%) could be an excellent idea for long-term investors who have a lot of cash to work with.

Realty Income

Realty Income is part of a special class of companies called real estate investment trusts (REITs), designed to give investors access to the wealth-generating power of real estate. The structure requires the company to return the vast majority of profits to shareholders, leading to a large and steadily growing dividend payout. Meanwhile, its defensive and well-diversified business model allows large investors to sleep a little easier at night.

Realty Income

Today’s Change

(-0.32%) $-0.18

Current Price

$56.49

While it can be tempting to chase market-beating returns in hyped-up new industries like generative artificial intelligence (AI) or quantum computing, these companies have a higher risk of failure, making them somewhat undesirable for investors who prioritize capital preservation. Income Realty offers exposure to more proven sides of the economy, like grocery stores, convenience stores, and automotive service shops.

Realty Income further reduces risk through triple-net leases, where the tenant is required to pay for property-level operating expenses like taxes, maintenance, and insurance. This strategy shields the REIT’s cash flows from macroeconomic challenges like inflation, which tends to be relatively high in the real estate industry.

Realty Income’s main selling point is its dividend yield, which now stands at 5.74% annually, broken into 12 monthly payments. This payout trounces the S&P 500‘s average of just 1.2%, and it probably won’t stay this low forever. The Federal Reserve has started to lower interest rates. This trend benefits REITs because it makes it cheaper for them to borrow money for expansion, while also making their yields look more attractive relative to other income-generating securities like Treasury bonds.

Alpine Income

Realty Income is an excellent company for income-focused investors. But with a market cap of $52 billion, it is already one of the largest REITs in the world. And the larger a company becomes, the harder it is to drive future growth. Alpine Income is an excellent alternative because of its similar strategy and significantly smaller market cap of just $250 million.

Like Realty Income, Alpine Income focuses on single-tenant commercial income properties. It minimizes risks by prioritizing publicly traded clients like Lowe’s, Dick’s Sporting Goods, and Walmart. These types of companies tend to have higher credit ratings, stable customer bases, and tons of cash, making them much more reliable sources of income. Triple-net leases help protect the company from property-level operating costs.

Image source: Getty Images.

As a small company, Alpine Income faces some risk from client concentration. In the third quarter, Lowe’s and Dick’s Sporting Goods represented a whopping 22% of its annualized base rent. On the flip side, new deals can easily move the needle. And management continues to expand through deals, including the acquisition of three properties for $2.8 million in October. Falling interest rates will make it even easier for the company to buy new assets in the future.

Alpine Income Property Trust

Today’s Change

(1.67%) $0.28

Current Price

$17.01

With a dividend yield of 7%, Alpine Income’s dividend yield is remarkably high. And there is plenty of room for it to continue growing over time, making the stock an extremely attractive long-term buy.

Which dividend stock is better for you?

Realty Income and Alpine Income are both diversified REITs with big dividends. But they serve very different investment strategies. Realty Income is the better pick for safety-focused investors because of its larger size and long track record of success. Alpine Income is the riskier pick. But it is better for investors who prioritize growth potential.