If you're like most people, you work hard to make a living. That work can be mentally and physically draining. Since you already work hard, shouldn't your hard-earned money start working for you?
A great way to put your money to work for you is by investing some of what's left each month into income-producing investments, like dividend-paying stocks. They can be a great source of passive income, which you can use to help offset your living expenses in the future so that you don't need to work quite so hard. Here are three great options to consider.
The name says it all
Realty Income(NYSE: O) is a real estate investment trust (REIT) focused on income-producing properties. It owns freestanding commercial buildings net leased to tenants in a variety of industries. Those leases provide it with very stable rental income that tends to rise steadily each year.
The REIT pays out less than a quarter of that income to investors via dividends. Realty Income's payout currently yields a little more than 5%. At that rate, every $100 invested in its stock would produce over $5 in passive dividend income each year. The more you invest, the more passive income you can collect.
Realty Income steadily increases its dividend, which it pays monthly. It has raised its payment 126 times since coming public in 1994, including for 107 straight quarters. The REIT has grown its dividend at a 4.3% compound annual rate during that period.
It's in an excellent position to continue paying a growing dividend. The REIT invests billions of dollars each year to expand its portfolio of income-producing properties. It has a strong financial profile and massive market opportunity, giving it a long runway to continue growing its dividend.
Piping passive income into your pocket
Kinder Morgan(NYSE: KMI) is one of the country's largest energy infrastructure operators. It operates an extensive network of pipelines, storage terminals, and other assets. These assets generate very stable cash flow backed by long-term contracts, government-regulated rate structures, and hedging agreements.
The pipeline company pays out a little more than half of its stable cash flow in dividends each year. It retains the rest to fund expansion projects, repurchase shares, and maintain its financial flexibility. The company currently has $5.2 billion of high-return expansion projects under construction that should come online through the end of 2028. They provide it with lots of visibility into the future growth of its cash flows.
Kinder Morgan's growing cash flow should support a steadily rising dividend. The company has increased its payout, which currently yields over 5%, for seven straight years.
The cash flow connection
Verizon(NYSE: VZ) hardly needs an introduction as one of the country's largest wireless and broadband service providers. It generates billions of dollars in cash flow each year as customers pay their wireless and internet bills.
The telecom giant has produced $16.6 billion in cash flow from operations through the first half of this year. Capital spending consumed less than half of that cash, leaving it with over $8.5 billion in free cash flow. That easily covered the company's $5.6 billion of dividend payments to shareholders. Verizon's payout currently yields over 6%, enabling its investors to generate more income for every dollar they invest.
Verizon expects its free cash flow to grow in the future, driven by rising revenues and falling costs. That should enable the company to continue increasing its dividend. It delivered its 17th consecutive dividend increase late last year, the longest current streak in the U.S. telecom sector.
Get your money to start making money for you
Most people work hard to make money. So it shouldn't sit idly in a bank account, barely earning any interest -- unless, of course, you're saving it for something specific like an emergency or down payment on a house.You should put it to work so it can make more money on your behalf. Investing in high-quality dividend stocks is a great place to start. They can provide you with an attractive and growing passive income stream. The more you invest, the more passive income you can collect, which could eventually allow you to work less.
Should you invest $1,000 in Realty Income right now?
Before you buy stock in Realty Income, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $731,449!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 26, 2024
Matt DiLallo has positions in Kinder Morgan, Realty Income, and Verizon Communications. The Motley Fool has positions in and recommends Kinder Morgan and Realty Income. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
