If you're worried about having enough passive income after you retire, there are plenty of options. Purchasing real estate to rent out is a popular option, but those rental properties will generate losses if you can't maintain them and find tenants who can pay their bills.
If you're interested in truly passive income, consider these dividend-paying stocks. They offer such high yields that just $11,930 spread among them is all it takes to set yourself up with $1,000 of annual dividend income in 2024.
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Buying these stocks looks like a great deal that could keep getting better. These businesses have a history of increasing their payouts, so you're likely to receive significantly more than $1,000 annually once you're ready to retire.
AT&T
Shares of AT&T (T +0.33%) offer investors a big 6.7% dividend yield at recent prices. At this level, $5,004 is enough to secure a little over $333 in annual dividend payments from the telecom giant.
NYSE: T
Key Data Points
Landline subscriptions are in steep decline, but America's need for telecommunications services has risen steadily. Data-hungry artificial intelligence (AI) applications and 5G-enabled mobile devices are driving growth for AT&T at a steady pace.
In the third quarter, mobility-service revenue rose 3.7% year over year, and operating income from the segment was better than it's ever been. The real growth driver for AT&T these days is consumer broadband. Revenue from this segment rose 9.8% year over year in Q3 driven by 296,000 new AT&T Fiber subscriptions.
Q3 2023 was the 15th in a row with more than 200,000 new AT&T Fiber subscribers, and its consumer-broadband sales will likely rise even further in 2024. AT&T Fiber is currently able to serve around 24 million consumer and business locations, and it's on pace to reach more than 30 million by the end of 2025. The company also launched a fixed wireless residential service that's already available in about 30 locations.
AT&T generated a whopping $19.8 billion in free cash flow over the past year and needed just 41% of this sum to meet its dividend commitment. That leaves plenty of room to raise the payout in line with earnings growth in the years ahead.
PennantPark Floating Rate Capital
Ever since the Great Recession, large American banks subject to stricter regulations have been hesitant to lend to middle-market businesses. As a result, companies that record between $10 million and $1 billion in annual revenue are generally starved for capital and willing to pay business development companies (BDC) like PennantPark Floating Rate Capital (PFLT +2.03%) above-average interest rates.
NYSE: PFLT
Key Data Points
As its name implies, PennantPark Floating Rate Capital is a lender that almost always lends at variable interest rates. This can make it hard for borrowers to repay debts if rates rise too fast, but with careful underwriting, floating-rate debt can also lead to very reliable cash flows.
At recent prices, PennantPark Floating Rate Capital offers investors a huge 10.3% dividend yield, and it distributes payments every month. At recent prices, $3,250 is enough to set yourself up with $333 in annual dividend payments from this stock in 2024.
PennantPark Floating Rate Capital raised its dividend payout by 7.9% in 2023, and further raises could be in the works. At the end of September, just 3 borrowers in this BDC's portfolio of 131 companies were on non-accrual status. With the variable interest rates they pay likely to fall significantly in 2024, cash flows ought to be relatively predictable for at least the next several years.
Altria Group
Shares of Altria Group (MO 0.91%) offer a juicy 9.2% dividend yield, so all it takes to secure $333 in annual dividend income from the stock at recent prices is about $3,680. Combustible cigarette sales have been in decline for decades, but this company's ability to raise the price of the leading Marlboro brand in the U.S. should let it continue a very long track record of consecutive annual payout increases.
NYSE: MO
Key Data Points
In Q3, Altria estimated an 8% year-over-year decline in domestic cigarette volume. Thanks to rising sales of non-combustible products, price increases on Marlboros, and share repurchases, adjusted earnings per share during the first nine months of 2023 rose 3.3% year over year.
This August, Altria Group raised its dividend payout for the 58th time in 54 years. The company generated $8.5 billion in free cash flow over the past year but needed just $6.7 billion to meet its dividend commitment.
With extra cash flows to pay down debts and acquire new sources of growth, such as NJOY, the only e-vapor manufacturer with market authorizations from the U.S. Food and Drug Administration (FDA) for a pod-based, e-vapor product, investors can reasonably expect this stock to keep up its 54-year streak for at least another decade.
