Collecting passive income can help you gain more financial freedom. As your passive income grows, you become less dependent on your active income from working. That can help you steadily reduce your stress levels.
There are many great ways to increase passive income, including investing in dividend stocks. Real estate income (NYSE:O), Kinder Morgan (NYSE: KMI)And Verizon Communications (NYSE: VZ) are three top options to buy in November if you want to earn more passive income.
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Realty Income is a real estate investment trust (REIT) with a mission to deliver reliable monthly dividends to its investors that grow over time. The REIT has certainly achieved that goal over the years. It has increased its payout for the past 30 years in a row, inclusive the past 108 quarters in a row.
The REIT currently offers a yield of more than 5%. That is several times higher than the average dividend share (the S&P500‘S the dividend yield is less than 1.5%). In other words, every $100 you invest in Realty Income would generate about $5 in annual passive income, compared to less than $1.50 for a comparable investment in the average dividend stock.
Realty Income should be able to continue increasing its dividend. The REIT expects to grow its custom funds from operations (FFO) by approximately 4% to 5% per share every year. Rental growth will add about 1 percentage point, while the purchase of income-producing real estate will provide the remainder.
The REIT has a strong financial profile and balance sheet, making it sufficient flexibility to continue making acquisitions. Meanwhile, given the size of the commercial real estate market in the US and Europe, it has a billion-dollar investment opportunity.
Kinder Morgan is leading pipeline company who exploits the land largest natural gas pipeline system. It also owns product pipelines, terminals and carbon dioxide infrastructure.
The company’s midstream assets are producing terribly stable cash flows supported by government-regulated interest rate structures and long-term fixed rate contracts. Kinder Morgan pays out a little more than half of its stable cash flow in the form of dividends and retains the remainder to pay for expansion projects and maintain a strong financial foundation.
The company currently has $5.2 billion in expansion projects in its portfolio, including a big one Expansion of the $1.7 billion natural gas pipeline, which should enter commercial service by the end of 2028. And there are many more projects in development to support the expected increase in electricity demand in the coming years. These projects will increase the company’s cash flow, increasing its ability to increase its dividend, which it has done each of the past seven years.
Verizon recently achieved its 18th straight annual dividend increase, extending the longest current streak in the U.S. telecom sector. The payout is currently 6.5%.
The mobile and broadband company high-yield dividends have become safer this quarter. Verizon is generating more cash than needed to cover capital expenditures and dividends. It uses that excess free cash flow to strengthen its position al solid balance sheet.
Verizon plans to use its growing financial flexibility for acquisitions Border communication in a $20 billion all-cash deal. The transaction will expand the fiber offering while increasing earnings and free cash flow. The company’s debt levels will increase following the deal, but it expects to repay these loans within a few years of closing the acquisition. With capital investments and the Frontier deal boosting earnings, Verizon should be able to continue increasing its dividend.
Realty Income, Kinder Morgan and Verizon currently offer higher yielding dividends, backed by solid financials. Meanwhile, all three companies have visible growth ahead, suggesting they should be able to continue raising their dividends. These characteristics make them great stocks to buy for passive income this month.
Consider the following before purchasing shares in Realty Income:
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Matt DiLallo holds positions at Kinder Morgan, Realty Income and Verizon Communications. The Motley Fool holds and recommends positions in Kinder Morgan and Realty Income. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
3 Top Dividend Stocks to Buy for Passive Income in November was originally published by The Motley Fool
