If you’re trying to secure a stream of passive income to support your retirement dreams, there’s more than one way to make it happen. Buying rental properties is an easy-to-understand option that you are probably already familiar with. Unfortunately, owning rental properties comes with daily responsibilities that most retirees would rather avoid.
If you want to build a truly passive income stream, you’re probably much better off buying dividend-paying stocks and holding them for the long term. Pfizer (NYSE:PFE), PennantPark Capital with variable interest (NYSE:PFLT)And Ares Capital (NASDAQ: ARCC) offering ultra-high yields averaging 8.8% at recent prices. With an average return this high, an investment of $11,400, evenly divided between them, is enough to give you a dividend income of $1,000 annually.
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If there’s one thing income-seeking investors can count on, it’s the steadily rising demand for prescription drugs. As one of the largest drug manufacturers in the world, Pfizer has increased its dividend payout for fifteen years in a row. At recent prices, it offers a yield of 6.7%.
Pfizer’s stock price fell in 2023 in response to rapidly declining sales of COVID-19 products. The company is still depressed because some of its biggest revenue streams, such as its oral blood thinner Eliquis, could lose patent-protected exclusivity in the coming years.
The coming patent cliffs will put pressure on Pfizer’s dividend growth rate over the next decade. However, with many new revenue streams coming online, they likely won’t stop the company from increasing its payouts over the next fifteen years.
Pfizer invested big with its COVID-19 vaccine windfall, and many are succeeding. In the first nine months of 2024, sales of the COVID-19 vaccine fell 66% to $2.0 billion. Despite the loss, total revenue increased 3% year-on-year.
The FDA approved nine new drugs from Pfizer’s prolific development pipeline in 2023. In the US, where these new drugs are already driving growth, product sales rose 27% year over year in the first nine months of 2024.
PennantPark Floating Rate Capital is a business development company (BDC), which means it provides loans to mid-market companies. U.S. banks have been less likely to lend directly to companies for decades.
Mid-market companies have been hungry for capital loans at rates you may find surprising. The average return on debt investments in this BDC’s portfolio was 11.5% at the end of September.
