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3 Top Dividend Stocks to Buy Today for a Lifetime of Passive Income

Many investors like to own stocks that provide passive income to their shareholders. The amount of dividend income may be insignificant at first, but after a few decades of growth, those dividend payments start to pile up, especially if you pick stocks of growing companies with a history of increasing their dividends.

Many of the strongest companies in the world pay regular dividends. Three Motley Fool contributors were asked to name their top picks for investors looking for a predictable income stream from their investments. This is why they chose Real estate income (NYSE:O), DIY store (NYSE: HD)And Starbucks (NASDAQ:SBUX).

This company must pay a high return, and monthly

Jennifer Saibil (real estate income): Realty Income has an exclusive status that applies to a select group of stocks: it pays monthly dividends. That’s an unusual and valuable benefit for passive income investors and especially retirees.

But that’s not the only feature that marks this real estate investment trust (REIT) as an ideal dividend stock. It delivers high returns, which is often the most celebrated aspect of top dividend stocks. At today’s price it yields about 6%.

Realty Income also operates a business with stability and reliability. It owns more than 15,000 properties worldwide and has sufficient resources to acquire new ones and stay in growth mode. It is well diversified, with 1,300 customers across 86 sectors, and 82% is concentrated in retail. The top tenants are mainly in the essential categories, with supermarkets and convenience stores in the top two.

Realty Income runs an efficient business that is doing well despite inflation and a gloomy real estate market, maintaining an occupancy rate of approximately 98.6%.

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While it has not been immune to the impact of high interest rates, it is showing strong performance, with earnings per share of $0.30 in Q4 2023 and $1.01 in adjusted funds from operations. Realty Income has paid 646 consecutive monthly dividends – that’s more than 53 years – with 106 consecutive quarterly increases, and there is no danger of this streak needing to be halted.

Fears about real estate and interest rates have eroded investor confidence in real estate-focused stocks like Realty Income, and Realty Income stock is down 16% in the past year. But this certainly looks like short-term external pressure. That makes it an excellent time to buy and take advantage of the low price and high yield, which move inversely. But more than just the short-term value, you’ll benefit from a lifetime of reliable and growing passive income.

A proven winner in the long term

Jeremy Bowman (Home Depot): If I were to make a list of lifetime dividend stocks that I should own, there’s no doubt that Home Depot would be at the top of the list.

The home improvement retailer is one of the best-performing stocks in history and has a number of competitive advantages that are unlikely to change no matter what happens with technology or geopolitics.

It is part of a duopoly in the home improvement retail industry Lowe’sa huge corner of the high-margin retail market that faces barriers to entry from both e-commerce competitors and Amazon and smaller companies that don’t have the scale or physical real estate to compete.

After saturated the retail home improvement market with stores, the company has pivoted to investing in its digital platform and returning capital to shareholders through share buybacks and dividends. With an eye on expansion, Home Depot also just acquired SRS Distribution, a leading distributor of building materials for specialty stores. The move expanded its addressable market by $50 billion and should help the company increase its competitive advantage in the professional market.

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Home Depot also has a long history of rewarding investors with dividend increases, as it regularly increases its dividend by double digits annually. The company currently pays a dividend yield of 2.56%.

With interest rates high, the housing market has been sluggish, but that presents an attractive buying opportunity for Home Depot as its shares are down about 20% from their pandemic peak. With interest rates falling, which is expected to happen later this year, the housing market should strengthen and Home Depot shares are likely to recover.

A global drinks brand with a tasty yield

John Ballard (Starbucks): Starbucks has several features that make it an ideal stock to buy if you’re primarily focused on earning passive income. Starbucks not only pays an above-average return of over 2.5% at current share prices, but is also posting double-digit earnings growth. Investors can potentially beat the average market return given the company’s growth potential.

Starbucks is a globally recognized brand. Management believes it can successfully open 55,000 stores worldwide by 2030. The international growth opportunities are an important part of management’s objective to achieve profitable growth. The Wall Street consensus expects Starbucks to achieve annualized growth of 15% in the coming years.

The brand entered the year with momentum. Rewards members rose 13% year over year in the quarter ended December. It reaches new members, while spending among its most loyal customers reached an all-time high.

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In the long run, it’s hard to go wrong investing in top consumer brands that generate repeat business with millions of customers. There are 34 million members in Starbucks’ rewards program. It’s ultimately why Starbucks is able to return about half of its free cash flow to shareholders each year in the form of growing dividend payments.

Should you invest €1,000 in real estate income now?

Consider the following before purchasing shares in Realty Income:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $518,784!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns April 15, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no positions in any of the stocks mentioned. Jeremy Bowman has positions in Amazon and Starbucks. John Ballard has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Amazon, Home Depot, Realty Income and Starbucks. The Motley Fool recommends Lowe’s Companies. The Motley Fool has a disclosure policy.

The 3 Best Dividend Stocks to Buy Today for a Lifetime of Passive Income was originally published by The Motley Fool

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