3 Stocks Down 25% or More to Buy for Decades of Passive Income

Passive-income stocks can be some of the best investments to buy during a market correction. Since yield and stock price tend to have an inverse relationship, investors can get access to reliable income at a discount when quality dividend stocks begin to dip in price.

Take Mid-America Apartment Communities (MAA -0.14%), Crown Castle (CCI 1.42%), and Digital Realty Trust (DLR 0.67%). All three stocks have an incredible track record of dividend growth and look well positioned to pay passive incomes for decades to come. Yet all three stocks are trading down 25% or more from the start of 2022, pushing their yields to 2.9% or more.

Here's a closer look at each company and why three Motley Fool contributors believe these solid dividend payers are fantastic buys today.

Mid-America Apartment Communities proves it's hard to keep a good apartment REIT down

Kristi Waterworth (Mid-America Apartment Communities): Passive income stocks come in a lot of shapes and sizes, but when I'm looking for a real estate investment trust (REIT) that I plan to buy and hold for decades, the first thing I consider is what business it's in. Industries that are going through a lot of changes, like office REITs or hospitality REITs don't tend to reach the top of my list because they require a lot of attention during times of abrupt change.

Businesses focused on things people use every day tend to get my attention. Housing, including rentals, get everyday use and residential REITs like Mid-America Apartment Communities is in the business of rentals.   

Mid-America Apartment Communities focuses on buying inexpensive apartments, remodeling them, and adding value for its tenants, rather than building new, wearing the apartment out, and then selling it to begin again. For me, this is an ethical decision, as well as a financial one. Apartment holders that simply build and sell off worn-out units aren't really doing anything to improve the lives of their tenants or their communities.

Mid-America, on the other hand, is doing exactly that and making massive profits while preserving and maintaining aging structures, rather than simply throwing them away. In 2022 alone, it increased revenue across its communities by an average of 13.5%, in part by adding actual value to over 6,500 units. These updated units saw an average rent increase of 10% per unit versus similar non-renovated units, and there are about 13,000 more left to do, according to the company's most recent reporting.  

Mid-America's dividends also continue to climb and were raised twice in 2022, and again in the first quarter of 2023, from $1.025 per share each quarter throughout 2021 to $1.40 per share in Q1 2023, a 36% gain for investors who simply showed up. With stable assets and debt, a well-established pipeline of upgraded units and communities on the way, and a history of finding value in buildings that others have discarded, MAA is a stock I'll be holding for decades of passive income.

Right now is a great time to buy Mid-America Apartment Communities stock, as it's currently trading down over 20.5% from its 12-month high.

Crown Castle shares are still down but its dividend keeps growing

Marc Rapport (Crown Castle): Even after a year in which it grew income by 45%, funds from operations (FFO) by 6%, and its dividend by 9%, Crown Castle stock is still down about 23.4% from its 52-week high and about 16% from this point last year.

That makes this a particularly propitious time to buy shares of this major provider of telecommunications infrastructure, especially for investors in their retirement years who like a good mix of growth potential and passive income in their stock portfolios.

Crown Castle boasts a portfolio of 43,000 cell towers, 85,000 miles of fiber cable, and about 115,000 small cell nodes. The latter is a particularly critical part of the rollout of 5G networks across the country and the company is moving ahead with plans to double the deployment of those mini-tower and antenna sites to 10,000 a year in 2023.

Looking ahead to 2023, Crown Castle is guiding for 4% growth in adjusted FFO -- that's the cash flow it uses to fund dividends -- down from 6% in 2022, and 4% growth in site rental revenue, also down from 10% last year. The company is also projecting a decline of 2% to 3% in income from continuing operations by mid-2023.

While those numbers might look a bit discouraging, they're not bad considering the interest rate environment and this REIT's recession-proof position as the leaser of must-have mobile tower space to all the major carriers and thousands of other customers large and small.

Since becoming a REIT in 2014, Crown Castle has outpaced the S&P 500 in total return and in yield, currently paying a respectable 4.3%. I own shares of Crown Castle and am confident that management will continue following through on the pledge it first made in 2017 and reiterated each year to grow dividends by 7% to 8% a year.

Digital Realty Trust has 17 years of dividend increases under its belt

Liz Brumer-Smith (Digital Realty Trust): Reliability is one of the key things I look for when buying a passive-income stock. High yields are great, but if they can't be maintained over the long term it doesn't hold as much value for me. I like seeing stocks with a consistent history of maintaining or raising dividends -- something Digital Realty Trust has.

Digital Realty Trust is a data center REIT that owns and leases roughly 300 data center facilities across 26 countries. Data centers help companies store, aggregate, and transmit digital data. Social media, streaming, cloud-based services, online education programs, 5G technology, and countless others rely on data centers to operate. And due to the high cost to own and operate a facility, most companies lease data center space rather than construct their own.

The company has had a healthy year with its third-quarter earnings seeing record bookings within its facilities. Its core metrics including net operating income (NOI) and FFO are all up year over year. Its fourth-quarter and full-year 2022 earnings results should be reported in February, but investors are bullish on its earnings given the robust demand it's seen so far this year and its recently completed acquisition of Teraco, which should be accretive in the fourth quarter. 

Data center demand has increased steadily over the last few decades as more technologies are introduced and adopted. This demand isn't something I see stopping anytime soon. If anything it should continue increasing as people continue to navigate remote and hybrid working in addition to introducing new technologies like virtual reality or artificial intelligence.

Aside from the long-term trends favoring the demand for the company's services and properties, it's in a solid financial position and is growing rapidly. Plus it boasts an attractive dividend yield of 4.4% with over 17 years of dividend increases under its belt. Its dividend is well covered by its FFO, meaning there's plenty of room for the company to keep paying and growing its dividend in the decades to come. Considering the stock is down 18.8% over the last year, right now is a favorable time to buy this top-tier income company.