3 Top-Notch Dividend Stocks to Buy for Passive Income in July

Investing in dividends stocks is a great way to generate passive income. Many companies pay dividends you can bank on each quarter (and some even pay monthly dividends).  

While investors have many dividend-paying options, real estate investment trusts (REITs) are often ideal for those seeking to collect passive income. Most REITs offer dividends with above-average yields that they steadily increase. American Tower (AMT -0.70%), Stag Industrial (STAG -0.17%), and W. P. Carey (WPC -1.70%) stand out as top-notch REITs to buy for passive income this July.

Another year of double-digit dividend growth

American Tower currently offers a 3.3% dividend yield. That's double the dividend yield of the S&P 500 (currently 1.6%). It could turn a $1,000 investment into roughly $33 of annual dividend income. That compares to only $16 of dividend income for every $1,000 invested in an S&P 500 index fund. 

The data infrastructure REIT generates lots of steady cash flow to support that payout, backed by long-term leases for space on its cell towers and in its data centers. The company expects to generate about $4.5 billion of adjusted funds from operations (FFO) this year. That's enough to cover its planned dividend outlay (about $3 billion) and growth capital spending (roughly $1.5 billion).

The company's 2023 capital plan targets around 10% dividend per share growth. That would continue the rapid rise in the company's payout, which has grown at a more than 20% compound annual rate since American Tower converted to a REIT over a decade ago. Meanwhile, the capital spending will enable it to build additional cell towers and data center capacity. Those investments should help grow its cash flow in the future, giving it more money to pay dividends.

Dual growth drivers should keep pushing the payout higher

Stag Industrial pays a 4.1%-yielding monthly dividend. The industrial REIT backs that payout with a strong portfolio of income-producing industrial properties like warehouses and light manufacturing facilities secured by long-term leases. 

Demand for these facilities is growing, driven by supply chain issues and the accelerated adoption of e-commerce. That's pushing up market rents. Stag Industrial is steadily capturing the rise in market rents as existing leases expire, and it signs new ones on that space. As of late April, it had addressed nearly 80% of its 2023 lease expirations, achieving an average cash rent change of more than 30%. Rising rents help grow its cash flow. 

The REIT's other growth driver is acquisitions. Over the last eight years, it has acquired an average of $750 million in properties. While the company expects acquisition volume to be lower this year ($300 million-$700 million) because real estate cap rates haven't risen as fast as interest rates, it has a $3 billion deal pipeline. That shows it has plenty of opportunities to continue expanding.

Those growth drivers should enable Stag Industrial to continue steadily increasing its dividend as it has done each year since its initial public offering in 2011. 

A milestone year

W. P. Carey's dividend yields 6.3%. The REIT backs that payout with a diversified portfolio of operationally essential real estate leased to high-quality tenants. It owns industrial, warehouse, office, retail, self-storage, and other properties secured by triple-net (NNN) leases.

More than half of its leases feature annual escalation clauses tied to inflation. With inflation still elevated, rents across W. P. Carey's portfolio are growing faster than usual. That should continue through at least next year, given the timing of when its lease escalations hit rents.

Acquisitions are its other growth driver. The company anticipates investing $1.8 billion to $2.3 billion in expanding its portfolio this year. Acquisitions supply it with incremental income that should grow as rents rise in the future. 

W. P. Carey's dual growth drivers should enable it to continue increasing its dividend. The REIT has given its investors a raise every year since its public market listing in September 1998. That has it closing in on a quarter century of steady dividend growth.

Passive income machines

American Tower, Stag Industrial, and W. P. Carey offer above-average dividend yields backed by high-quality real estate portfolios. Meanwhile, the REITs have excellent track records of growing their payouts, which should continue. They're great stocks to buy this month to collect sizable and steadily rising passive income streams.