If you've got plenty of time and energy, you have myriad options for generating income. For most of us, this means running a business, traditional employment, or freelancing in the gig economy.
If you're short on time and energy, you still have options. By living below your means and investing your savings in dividend-paying stocks, you can passively generate income without lifting a finger.
Not every dividend-paying stock is prepared to deliver steady earnings that allow for ever-increasing dividend payments. With enviable track records, though, these two stocks could continue making and raising their dividend payouts throughout your retirement years.
For more than five decades, Realty Income (O 0.39%) has been a winning stock for dividend-seeking investors. The shares currently offer a 4.2% yield, and investors can reasonably expect heaps more passive income from this stock in the years ahead. It's been a publicly traded company since 1994, and since then, it has steadily raised its monthly dividend payout at least once per year.
Realty Income is a real estate investment trust (REIT), which means the company doesn't need to pay income taxes. In return for the tax advantage, though, REITs must distribute at least 90% of their profits to shareholders as nonqualified dividends.
When businesses only get to hang on to a sliver of their bottom line, they tend to be highly methodical about their investment decisions. Realty Income acquires commercial properties that it leases back to tenants with investment-grade credit ratings. The vast majority of this REIT's tenants have signed triple-net leases that require them to absorb the three main variable expenses that come with real estate ownership -- taxes, insurance, and maintenance.
There are no guarantees that the next 50 years for Realty Income will be as successful as its past. Jittery investors will be glad to know that this company's highly predictable cash flows allowed it to raise its dividend payout three times in 2020. By rinsing and repeating its well-understood process, Realty Income will probably provide steadily rising payouts for decades to come.
Medical Properties Trust
In the U.S. and nearly every other developed economy, a combination of falling birth rates and increasing life spans means populations are getting older. As a result, the Centers for Medicaid and Medicare Services (CMS) believes that national health spending will climb at a rate of 5.1% annually and reach $6.8 trillion in 2030.
One way to feel a little less anxious about rising healthcare expenses is by putting your money to work in a company poised to benefit from the unstoppable upward trend. Medical Properties Trust (MPW -0.62%) is a REIT that owns around 440 hospitals in the U.S. and around the world. In addition to hospitals collectively worth around $16 billion, its portfolio includes $4.6 billion worth of behavioral health centers and inpatient rehabilitation centers.
The stock currently offers a dividend that has risen every year since 2013. With a yield of 7.3% at the moment, investors could begin seeing annual returns at a double-digit percentage in just a few short years.
Like Realty Income, Medical Properties Trust gets hospital operators to sign absolute net leases that leave them responsible for all the variable costs of hospital ownership. The strategy is obviously working. In the first quarter, the company reported normalized funds from operations (FFO) that rose 12% year over year to $0.47 per share. FFO is the standard way to measure the cash flows a REIT generates.
With a quarterly dividend currently set at just $0.29 per share or just 62% of normalized FFO, investors can look forward to a significant payout bump in the near term. With highly reliable cash flows from a geographically diverse collection of hospitals, Medical Properties Trust shareholders can also expect this company to ride the trend toward increased healthcare spending for many years to come.