It's a trying time to be an investor. During the first half of 2022, we witnessed back-to-back quarterly declines in U.S. gross domestic product, a four-decade high for inflation (9.1% in June 2022), and the worst return for the benchmark S&P 500 in over a half-century.
Believe it or not, it's been an even tougher slog for the growth-focused Nasdaq Composite (^IXIC 2.02%). Since hitting its all-time record-closing high in mid-November, the widely followed index has shed as much as 34% of its value. With the Nasdaq leading the market higher for years, its descent into a bear market is a true concern.
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But where there's trouble in the stock market, there's usually opportunity. In particular, it could be the perfect time for long-term investors to use the Nasdaq bear market as an excuse to scoop up dividend stocks at a sizable discount. Dividend stocks are often profitable and time-tested. What's more, they offer a rich history of long-term outperformance relative to stocks that don't pay a dividend.
What follows are three passive-income powerhouses that have the tools and intangibles to double your money by 2027.
Broadcom: 3.26% yield
This first supercharged dividend stock that can help you double your money over the next five years is semiconductor solutions specialist Broadcom (AVGO 3.84%). Keep in mind that while Broadcom's yield of 3.26% might look somewhat pedestrian, the company has grown its quarterly payout by more than 5,700% since 2010.
Even with economic weakness and supply chain headwinds weighing on Broadcom in the very short term, three positive catalysts stand out for this top-tier income stock.
To start with, Broadcom is a clear-cut beneficiary of the 5G revolution. It's been about a decade since telecom companies last upgraded their wireless infrastructure. This steady move to 5G download speeds should encourage an ongoing device replacement cycle. Broadcom generates the bulk of its revenue supplying wireless chips and accessories used in next-generation smartphones.
The second catalyst for Broadcom is the company's impressive backlog, which stood at a record $14.9 billion when 2021 came to a close. Even with high inflation and uncertainty weighing on the U.S. economy, this backlog provides a level of operating cash flow transparency that most other chipmakers can't match.
Third, Broadcom should benefit immensely from its fast-growing ancillary segments. For example, the company provides connectivity and access chips used in data center servers. In the wake of the COVID-19 pandemic, businesses are shifting their data into the cloud at an even faster pace. Additionally, next-gen vehicles have become more reliant on technology, including semiconductor solutions.
Antero Midstream: 8.94% yield
The second passive-income powerhouse to buy during the Nasdaq bear market that has the catalysts needed to double your money by 2027 is energy stock Antero Midstream (AM -0.28%). You'll note that Antero Midstream is doling out an 8.9% yield, which isn't a typo.
For some investors, the idea of putting their money to work in oil and gas stocks simply isn't palatable. If that's because of socially conscious investing concerns, it's completely understandable. But if you're worried about oil and natural gas demand falling off a cliff again and adversely impacting energy stocks like Antero Midstream, your worry is misplaced.
As its name implies, Antero is a midstream company that deals with natural gas gathering and processing, as well as water handling, for parent company Antero Resources (AR 1.23%). Midstream companies are effectively energy middlemen. In Antero Midstream's case, its contracts are entirely fixed-fee, which makes its operating cash flow highly predictable no matter how volatile natural gas spot prices become. Having transparent cash flow is important since it allows the company to outlay capital for infrastructure projects without adversely impacting its profitability or distribution.
The other significant catalyst comes courtesy of parent Antero Resources. With natural gas prices soaring, Antero Resources has plans to increase drilling on Antero Midstream's acreage. In order to ensure it has abundant capital to invest in infrastructure in the very short run, Antero Midstream reduced its distribution by 27% last year, but plans to keep its payout unchanged moving forward. In return for reducing its payout -- again, it's still yielding almost 9% -- Antero Midstream expects to generate $200 million in incremental free cash flow through the midpoint of the decade, after dividends. In other words, shareholders should expect earnings growth and potential share price appreciation...as well as an inflation-crushing payout.
Furthermore, global supply chain problems are likely to keep energy spot prices elevated. Russia's invasion of Ukraine in February, coupled with years of reduced capital investment tied to the COVID-19 pandemic, will make it difficult for global natural gas supply needs to be met. This provides even more impetus for parent Antero Resources to drill.
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Innovative Industrial Properties: 7.87% yield
The third passive-income powerhouse that can double your money by 2027 is cannabis-focused real estate investment trust (REIT) Innovative Industrial Properties (IIPR -0.17%). Based on the company's recently declared $1.80 dividend for the third quarter, the extrapolated 12-month yield on IIP, as the company is more commonly known, is a juicy 7.9%.
Like most REITs, IIP's business model is to acquire properties that can be leased out for extended lengths of time. In IIP's case, it's acquiring medical marijuana cultivation and processing facilities. Approximately three-quarters of all states have given the green light to medical marijuana, which provides the company with abundant opportunities to purchase and lease properties. As of early September, its portfolio consisted of 111 properties spanning 8.7 million square feet of rentable space in 19 states.
Although acquisitions are Innovative Industrial Properties' primary growth method, it does have a modest organic growth component built in. In addition to passing along inflationary rent increases each year to its tenants, it also collects a 1.5% property management fee that's tied to the base rental rate.
The great thing about REITs is that their operating cash flow is predictable. As of the end of June, 99% of the company's rent was being collected on time. Although it does have a delinquent tenant, IIP is working on strategies that could see it move those leases to other multi-state operators.
Furthermore, Innovative Industrial Properties is actually benefiting from Congress' lack of progress on cannabis reform. As long as marijuana remains a federally illicit substance, pot companies have limited access to basic financial services. IIP has stepped in with its sale-leaseback program to resolve financing issues for multi-state operators. IIP purchases properties with cash and immediately leases the property back to the seller. This way pot companies get cash on their balance sheets and IIP lands a long-term tenant.
Innovative Industrial Properties might not be the most well-known name in the REIT space, but its quarterly payout growth of 1,100% in five years makes it an income juggernaut that investors can trust.
