Contents
- 1 Investing in Dividend Stocks for Passive Income
- 2 Piping Passive Income into Your Portfolio
- 3 Your Connection to a Prodigious Passive Income Stream
- 4 More Income from This Option
- 5 Lots of Growth Left
- 6 Steadily Rising Passive Income
- 7 Don’t Miss This Second Chance at a Potentially Lucrative Opportunity
Investing in Dividend Stocks for Passive Income
Dividend stocks present a compelling opportunity for those looking to cultivate a stream of passive income. Companies frequently distribute a share of their profits as dividends to investors, making them an attractive option for income-focused investors. While the average yield of dividend stocks hovers around 1.5% in line with the S&P 500’s yield, there are companies offering more generous payouts. Notable among them are Kinder Morgan, Verizon, Brookfield Infrastructure Partners, and Agree Realty, each boasting a dividend yield of 4% or more. These companies also have strong track records of increasing their dividends over time.
Piping Passive Income into Your Portfolio
Kinder Morgan stands out with a dividend yield exceeding 5%. As a leader in the pipeline sector, the company supports its high-yield dividend through stable cash flow. About 68% of this cash flow is secured by take-or-pay agreements and hedging contracts, ensuring fixed payments irrespective of volume or commodity price fluctuations. The remainder largely comes from fee-based cash flow sources with minimal exposure to volume changes.
Kinder Morgan distributes approximately half of its stable cash flow as dividends, while reinvesting the rest in expansion projects and maintaining a robust balance sheet. The company is currently channeling $5.2 billion into high-return expansion projects, set to bolster cash flow over the coming years. Additionally, it leverages financial flexibility for strategic acquisitions, such as the $1.8 billion purchase of STX Midstream. These growth initiatives are expected to fuel future dividend increases, marking 2024 as the seventh consecutive year of growth.
Your Connection to a Prodigious Passive Income Stream
Verizon offers a dividend yield surpassing 6%, underpinned by 18 consecutive years of dividend growth—the longest streak in the U.S. telecom sector. Generating substantial cash, Verizon’s operating cash flow reached $16.6 billion in the first half of the year. This was sufficient to cover capital expenses and dividends, with excess used to fortify its balance sheet.
The improved financial position empowers Verizon to expand its fiber business, exemplified by its $20 billion acquisition of Frontier. This move is anticipated to enhance free cash flow and facilitate debt repayment. Concurrently, capital investments in fiber and 5G initiatives are expected to further boost cash flow, supporting continued dividend growth.
More Income from This Option
Brookfield Infrastructure Partners offers a nearly 5% dividend yield, higher than its corporate counterpart, Brookfield Infrastructure Corp., which offers around 4%. The key difference lies in the tax documentation: the partnership issues a Schedule K-1 form, whereas the corporation provides a 1099-Div form.
Both entities distribute equivalent quarterly dividends, with plans for annual growth between 5% to 9%. This aligns with Brookfield Infrastructure’s impressive 15-year streak of increasing dividends. The company relies on stable and escalating cash flows, driven by inflation adjustments, volume growth, capital projects, and acquisitions, projecting more than 10% annual growth in funds from operations per share.
Lots of Growth Left
Agree Realty boasts a 4% yield, with its monthly dividend growing at a compound annual rate of 5.7% over the past decade. Specializing in freestanding properties net leased or ground leased to high-quality retail tenants, nearly 70% of its rent originates from tenants with investment-grade credit ratings. Key tenant sectors include grocery stores, home improvement centers, and tire and auto service locations, which are resilient against e-commerce and economic downturns.
Agree Realty expands its portfolio through acquisitions and development projects, supported by a solid balance sheet and significant growth potential. With current tenants owning over 166,000 locations, the REIT has a vast addressable market compared to its current 2,200 properties.
Steadily Rising Passive Income
Kinder Morgan, Verizon, Brookfield Infrastructure Partners, and Agree Realty each offer dividend yields above 4%, supported by stable cash flows and strong financial health. Their consistent dividend growth over the years suggests a promising outlook for continued increases. These attributes make them attractive choices for investors seeking reliable, steadily rising streams of passive income.
Don’t Miss This Second Chance at a Potentially Lucrative Opportunity
Do you ever feel like you’ve missed out on investing in top-performing stocks? If so, there’s an opportunity you won’t want to overlook.
Occasionally, our team of analysts issues a “Double Down” stock recommendation for companies poised for significant growth. If you’re concerned you’ve missed your chance, now is an opportune moment to invest before it’s too late. Consider these figures:
– Nvidia: A $1,000 investment during our 2009 double down would be worth $301,443 today!
– Apple: A $1,000 investment during our 2008 double down would be worth $42,842 today!
– Netflix: A $1,000 investment during our 2004 double down would be worth $380,400 today!
Currently, we’re issuing “Double Down” alerts for three exceptional companies. This opportunity may not arise again soon.
See 3 “Double Down” stocks ›
Stock Advisor returns as of 09/24/2024
