Dividends are an important part of a diversified portfolio. They provide value for investors even when the stock market is down, and they're a reliable source of passive income plus stock price appreciation. Dividend stocks trend toward large, stable companies, and they offer security to protect your portfolio.

However, there may be other benefits. There's evidence that dividend stocks may even outperform other stocks over time, like the proverbial slow-moving tortoise versus the growth stock hares. Consider famed investor Warren Buffett's holding company, Berkshire Hathaway, which is loaded with dividend stocks and has outperformed the S&P 500 over many decades.

The market is rising, up 26% this year, and it has reached above-average valuations. Is that a setup for a fall? Can it keep climbing? No one knows, and that's why it's essential to own dividend stocks. Ally Financial (ALLY 4.67%) and Realty Income (O 0.90%) are two top choices.

1. Ally: Keeping up with the big banks

Ally is a small, or maybe medium, fish in the sea of American banks, but it's making a name for itself as it promotes its differentiated platform. It's differentiated in several important ways that bode well for its future and its ability to capture market share. It may yet break into the top echelon of U.S. banks.

The first way it's different is that it's all online, and it's the top all-digital bank in the U.S. It has an impressive number of consumer account customers at 3.3 million, and it has added retail deposit customers for 62 consecutive quarters, including 57,000 in the third quarter.

Part of how it's been able to reach this point is that it already has a leading position as the top prime auto lender in the country. It started out as the financial segment of General Motors, and it already had a century-old, fully developed auto loan business when it was spun off in 2009. Auto loans remain its core business, and it continues to see healthy demand despite the tough interest rate environment. It had $9.4 billion in originations in the third quarter.

Ally stock has been under pressure, and it plunged in September after it disclosed that defaults have been worse than expected. Its recent update was that auto loan defaults are high at 2.24%, but it's taken strong risk-management action to bring that down. Ally stock jumped after the election along with most bank stocks, but it's still super cheap, trading at a forward 1-year price-to-earnings ratio of only 8 and a price-to-book value of 0.9. At this price, its dividend yields 3.2%, making this an excellent time to add this high-potential Buffett stock to your portfolio.

2. Realty Income: The no-brainer REIT

Realty Income is a real estate investment trust, and it may be the best one you can buy. It offers a mix of everything you could want in a dividend stock, such as a high yield, growth, and reliability. Oh, and it offers something very few REITs or dividend stocks offer -- a monthly payment.

Realty Income has paid a dividend for 653 consecutive months, and it has raised the dividend for 108 consecutive quarters. It yields a juicy 5.4% at the current price.

What sets it apart, on top of all that, is that it's secure and reliable for dividend growth. Not all REITs are reliable for their payouts or raises. In fact, the higher a yield is, the greater the chance is that there's some risk involved. Super high-yield REITs, which could pay 7% or even higher, are often risky plays and deal in industries like mortgage-backed securities that are sensitive to economic factors.

Realty Income is a retail REIT that has a diverse, and therefore more secure, base of tenants, but it overwhelmingly serves essentials categories like grocery and convenience stores that come with established, strong tenants like Walmart and Lowe's. It boasts an occupancy rate that has rarely dipped below 98% in recent years, with the exception of the early part of the pandemic when many physical stores weren't functioning.

Realty Income stock plummeted as the real estate industry felt the pressure of soaring interest rates, but that just makes it look like an even better buy right now. Buy Realty Income stock for its dividend, not its market-beating ability. It's an all-weather stock that provides passive income and stability, and almost any time is a good time to buy shares.