Want passive income? Here are 3 Surefire Dividend Stocks You Won’t Want to Miss
There are many ways to start earning passive income. One of the simplest is to invest in stocks that pay dividends.
There are lots of options. Some of the favorites of our amateur passive income contributors are STORE Capital (STOCK -0.56%), Real estate income (O -0.11%)and STAG Industrial (STAG -1.20%). Here’s why they think these stocks are surefire ways to collect a steady stream of passive income.
STORE Capital is less sensitive to the economic cycle
Brent Nyitray (Capital STORE): STORE Capital is a real estate investment trust (REIT) that focuses on single-tenant real estate (the acronym of the company’s name), typically under a triple net lease. Most leases are gross leases, which require the landlord to pay for things like taxes, maintenance, and insurance, similar to an apartment lease. The tenant is responsible for the rent and not much else. Triple-net leases oblige the tenant to bear these ancillary costs. These leases are generally long-term and contain periodic increases based on an inflation index. Nearly 77% of STORE Capital’s leases expire after 2031. Since these leases are longer term, this provides certainty on both the REIT side and the tenant side.
The typical STORE Capital tenant is a restaurant, preschool or health club. The company also has manufacturing and retail facilities. STORE Capital uses a rigid methodology to source tenants and requires them to provide detailed financial projections that prove they can not only make the lease payments, but also grow the business and thrive. This business model attracted legendary investor Warren Buffett, and STORE Capital is a holding company of Berkshire Hathaway.
STORE Capital’s tenant base includes many defensive industries, which means consumers are buying into them even if the economy enters a recession. Even in a recession, people will still need their car fixed, their kids watched and they hit the gym. During the COVID-19 pandemic, STORE Capital was able to maintain its dividend while most REITs cut theirs. At current levels, the stock has a dividend yield of 5.3%.
It’s all in the name
Matt DiLallo (Property income): Realty Income has built its business to provide its investors with reliable monthly income dividend income. The REIT has declared 626 consecutive monthly dividend payments over its 53 years of operation. Even better, it has steadily increased its dividend over time. Overall, it has given investors 116 raises, including the last 99 consecutive quarters, increasing its payout at an annual rate of 4.4% since its IPO in 1994.
Several factors have contributed to Realty Income’s ability to pay a steadily increasing dividend. It all starts with the company’s resilient real estate portfolio. The REIT is focused on owning operationally critical standalone properties leased at triple net (NNN) to businesses operating in sustainable industries. Around 94% of its rental income comes from tenants in sectors resistant to economic downturns or the threat of e-commerce. Meanwhile, NNN leases make the tenant responsible for variable expenses such as maintenance, building insurance, and property taxes. These characteristics allow Realty Income to generate very stable rental income.
The REIT pays a conservative portion of its rental income (approximately 75% of its adjusted operating funds) to shareholders through its monthly dividend. Meanwhile, it has one of the strongest balance sheets in the REIT industry with an A-rated credit rating. These factors give the company great financial flexibility, allowing it to steadily acquire more income-producing real estate.
Add to that Realty Income’s above-average dividend yield, which currently sits at around 4%, and it’s an obvious buy for investors looking for a stable source of passive income.
STAG Industrial continues to pump passive income
Mark Report (Industrial STAG): STAG Industrial is an industrial REIT, a growing player in what was once the sedentary business of owning and leasing warehouse space. Not so laid back anymore.
E-commerce has made it one of the hottest sectors in commercial real estate, and STAG has not only followed suit, it has thrived. STAG outperformed the S&P500 and Dow Jones US Industrial & Office REITs by 45% and 500% respectively since its IPO in 2011.
In its first decade, the Boston-based company grew its holdings to approximately 111 million square feet of space in 559 buildings across 40 states, including adding nine buildings in the second quarter of 2022. STAG also reported an 18% year-over-year increase. funds from operations (FFO) per share. It is a key measure of how the company uses its cash. The same report also says it has the cash to spend $1 billion on acquisitions by the end of the year, so expect more.
Of course, we’re talking about passive income here, and STAG delivers on this account as well. The REIT has increased its payout by 11% on an annualized basis over the past three years and is now earning around 4.2% from a current dividend of $0.121667 per month. That’s right, it’s a monthly dividend payout, an added attraction for investors who like to get paid 12 times a year instead of just four.
E-commerce accounts for approximately 40% of STAG’s portfolio activity. In general, the company expects to benefit from both a rebound in retail inventory and growing demand for industrial space as companies relocate or establish new operations in the United States in a new “just in case” rather than the traditional “just on arrival”. manufacturing and time-distribution paradigm”.
STAG shares fell as e-commerce issues disrupted the market, including for the REIT’s largest tenant – Amazon represents approximately 3% of the REIT’s rent. But the four analysts who cover STAG all give it a buy and give it a consensus price target of $45.25, which would represent a 30% jump from its current level of around $35 per share.
I think it’s a good buy and hold. I own it now and intend to add stocks both for their growth potential and good monthly income stream.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Brent Nyitray, CFA has no position in any of the stocks mentioned. Marc Rapport has roles at Amazon, Realty Income, STORE Capital and Stag Industrial. Matthew DiLallo holds positions at Amazon, Berkshire Hathaway (B shares), Realty Income and Stag Industrial. The Motley Fool holds and recommends Amazon, Berkshire Hathaway (B shares), STORE Capital and Stag Industrial. The Motley Fool recommends the following options: $200 long calls in January 2023 on Berkshire Hathaway (B shares), $200 short puts in January 2023 on Berkshire Hathaway (B shares) and short calls of $265 in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.