With inflation running hot these days, most of us could use a little extra income to cover our rising expenses. One way to make some money on the side is by investing some actively earned income from a job into generating passive income. You can supercharge that income production through investments that steadily pay more income.
Investing in companies that pay a growing dividend is one option. Three dividend stocks that have been sending more cash to their investors are Energy Transfer (ET -0.23%), Retail Opportunity Investments Corp. (ROIC -0.74%), and Delek Logistics Partners (DKL -1.00%). All three companies offer above-average income yields and recently increased those payments. Those factors make them ideal for passive income production in an inflationary environment.
A 50% boost, with more on the way
This week, Energy Transfer gave its investors a 15% raise, boosting its quarterly distribution to $0.23 per unit. That's the master limited partnership's (MLP) third raise this year, in which it has increased the payout by 50%. At the current price, the pipeline company now yields 8.7%. Put another way, every $1,000 invested in Energy Transfer should produce $87 in annual passive income.
That income stream is likely to continue rising sharply in the coming quarters. Energy Transfer set an ultimate goal of returning its distribution to its prior peak of $0.305 per unit each quarter. It paid that rate in 2020 but reduced its distribution because of the pandemic's impact on the energy market. That means Energy Transfer could increase its payment by another 32.6%, implying an 11.6% yield at the current price.
It's taking a measured approach in returning the payout to that former level so it can maintain a solid financial profile while investing in a growing list of expansion projects as market conditions improve. Those investments could ultimately give Energy Transfer the fuel to grow its payout past its former pinnacle as they enter service in the coming years.
On the rise again
Retail Opportunity Investments recently increased its dividend payment from $0.13 per share each quarter to $0.15 per share, or by 15.4%. That will push the retail-focused real estate investment trust's (REIT) dividend yield to 3.6%.
That's the company's second raise in the past year. It's also working toward getting its dividend back up to its pre-pandemic level following a reset from its impact on the retail sector. If it reaches that former peak of $0.20 per share, Retail Opportunity investments would yield 4.9% at the current stock price.
There's also the possibility that Retail Opportunity Investments' dividend could eventually eclipse its former peak since the REIT had a long history of steadily growing it before the pandemic. The company has been retaining cash by paying a lower dividend over the past year, enabling it to strengthen its financial profile. That's allowing it to start buying more shopping centers, which will grow its rental income to potentially support an even higher dividend in the future. It lined up $120.2 million of acquisitions in the second quarter to enhance and grow its portfolio.
Delek Logistics Partners recently increased its cash distribution to $0.985 per unit. While that's only a 0.5% increase from the MLP's previous payment, it marked the 38th straight quarter it has given investors a raise, encompassing every single quarter since the end of 2012. Overall, the MLP's payment has risen 4.8% over the past year. At the current rate, Delek Logistics Partners yields 7.8%.
Delek Logistics Partners expects to continue growing its distribution, targeting to increase it by around 5% this year. The MLP recently acquired 3Bear Energy, which will diversify its customer base and expand its operations into a fast-growing production basin. That deal immediately boosted the company's cash flow, which should allow it to achieve its 2022 distribution growth target. Meanwhile, it provides a broader platform for future growth.
In addition to the expansion opportunities afforded by the 3Bear deal, Delek Logistics has the financial strength to continue making acquisitions to fuel future growth. Those deals should enable the MLP to continue steadily increasing its distribution.
More income ahead
Investing in companies that increase their dividends will help take away some of the sting of surging inflation because they can supply a rising income stream. Energy Transfer, Retail Opportunity Investments, and Delek Logistics have already proven that they can grow their payouts this year. Meanwhile, all three should be able to continue increasing them in the future. That makes them proven options for those seeking a growing income stream to help combat inflation.