After the bear market of 2022 slammed the share prices of most companies, now is a particularly opportune time to identify passive income stocks while they're cheap. There's no time like the present to build the foundations for tomorrow's wealth -- especially when it comes to stocks you could buy and hold for decades.
With that in mind, let's investigate three stocks that could help you shore up your passive income streams.
1. AbbVie
Pharma company AbbVie (ABBV -0.30%) is a screaming buy because of its proven ability to keep commercializing new medicines year after year. Beyond the $57.8 billion in revenue it generated over the trailing 12 months, management expects that just two of its newer drugs, Skyrizi and Rinvoq, will contribute more than $15 billion to its annual sales by 2025.
And that's not even considering the additional revenue that could come from seven of its candidate treatments that it anticipates will get regulatory approval in 2023.
With profitability and such a fast tempo of new drug launches, AbbVie can afford to pay out plenty of money in dividends, and it's also fond of returning capital to shareholders via share repurchases. In terms of its cash-generating potential for investors, its forward dividend yield is presently above 3.6%, and in the last five years, the company has hiked its payouts by an admirable 108.5%.
While it's true that the business faces some headwinds in 2023 -- particularly the loss of commercial exclusivity for Humira, its top-selling drug -- that's also part of why the stock is worth a purchase. Traders with short-term outlooks won't be willing to touch AbbVie due to the prospect of its revenue growth slowing in 2023 and perhaps 2024 due to the expected decline in Humira's sales.
However, investors willing to hold their shares for longer will benefit greatly by being patient. By the end of this decade, people who invested today should have profited significantly.
2. Innovative Industrial Properties
Innovative Industrial Properties (IIPR -0.82%) is a cannabis real estate investment trust (REIT) that buys marijuana cultivation and processing facilities, and then rents them back to the very businesses that it bought them from. According to a forecast by Green Street Advisory Group, a research service, medical and recreational marijuana cultivation activity in the U.S. will grow from $13.9 billion in 2022 to $26.9 billion by 2026. Based on that, Innovative Industrial Properties won't have much trouble finding new tenants.
That's not to imply it's currently having any trouble. Its collection of 111 leased properties brought in $226.5 million in cash from operations over the trailing 12-month period, and its renters typically have lease terms of between 15 and 20 years, so they should be sticking around for quite some time. Plus, its tenants are responsible for 100% of maintenance, utilities, and improvement costs, so IIP can keep its expenses low while it collects rent and seeks attractive buying opportunities.
The REIT's low-cost operations in a hot growth sector make it a shoo-in to remain a serial dividend hiker. Presently, its payout yields 7.1% annually, but in the last three years alone, management increased the dividend by a whopping 80%. Plus, the company will doubtlessly spend some of its $76.9 million in cash to increase its property holdings this year and beyond. All of the above makes it a no-brainer investment.
3. Pfizer
Pfizer (PFE -3.85%) needs no introduction, but it's worth a purchase this month because it will undoubtedly continue to be one of the leaders in the global pharmaceutical industry for the foreseeable future.
Between now and roughly June 2024, it will be launching a slew of new medicines that management predicts will bring in a total of around $20 billion per year by 2030. That should handily compensate for the sales it anticipates it will lose to generic medicines competing with its branded drugs between now and the end of the decade.
The consensus expectation among Wall Street analysts is that the company will report just over $100 billion in sales for 2022, largely as a result of the success of its COVID-19 vaccine, Comirnaty, and its COVID-19 antiviral treatment, Paxlovid. But Pfizer's future looks arguably even better.
Management is already planning on making near-term acquisitions that it hopes will add another $25 billion to the top line, and with $36.1 billion in cash and equivalents on its books, there aren't too many promising young biotechs it can't afford to gobble up.
Cash hoards like Pfizer's only get accumulated through powerful free cash flow over time. In the last five years alone, the company's quarterly free cash flow rose by 228% to $5.1 billion. And with that growth, it can afford a decent dividend. Its shares now sport a forward yield of around 3.2%, though over the last 10 years, management only boosted the payout by 70.8%. That won't make you rich overnight, but it would sure help if you held the stock for the long term.
