I love to collect passive income. There's just something special about getting paid for work someone else did. My goal is to eventually generate enough passive income so I don't have to work.
Part of my strategy is to invest in stocks with higher dividend yields since they enable me to generate more income for every dollar I invest. I try to invest a little money each month so that I can steadily make progress toward my goal. I plan to buy shares of a few higher-yielding stocks this April, including Brookfield Renewable (BEPC +0.00%)(BEP 0.13%), Realty Income (O +0.26%), and Vici Properties (VICI 0.18%). Here's why I'm planning to buy more shares of these big-time dividend stocks in the coming month.
An income-producing powerhouse
NYSE: BEPC
Key Data Points
Brookfield Renewable yields nearly 6% these days. That's several times higher than the S&P 500's dividend yield, which is around 1.3%.
The renewable energy company's big-time payout is very sustainable. Brookfield generates predictable cash flow. It sells about 90% of the power it produces under long-term, fixed-rate contracts to utilities and large corporate buyers. Inflation escalators in those contracts index about 70% of its revenue to inflation. That provides the company with steady revenue growth. Brookfield estimates that inflation will drive its funds from operations (FFO) up by 2% to 3% annually. The company also expects to get an additional FFO boost of 2% to 4% per share each year from margin enhancement activities like selling ancillary services.
Brookfield further backs its dividend with a rock-solid balance sheet. It has a strong BBB+ credit rating and primarily long-term, fixed-rate debt. That gives it lots of financial flexibility to fund new investments. The company has a massive backlog of renewable energy and sustainable solutions under development. It also expects to continue making accretive acquisitions. These growth drivers should help push its FFO growth rate into the double digits. That should give Brookfield the power to increase its already high-yielding dividend by 5% to 9% per year. It has delivered at least 5% annual growth for the past 13 years.
A very steady income grower
NYSE: O
Key Data Points
Realty Income also yields around 6% these days. The real estate investment trust (REIT) has done a fantastic job increasing its dividend over the years. It has raised its monthly dividend 124 times since its public market listing in 1994. It has grown its payout at a 4.3% compound annual rate during that period.
Like Brookfield, Realty Income generates very stable cash flow. The company owns a diversified commercial real estate portfolio (primarily retail, industrial, and gaming properties) secured by long-term net leases with high-quality tenants. Those leases provide steady rental income that rises each year. They contain escalation clauses that increase rents by a fixed rate or one tied to inflation.
Acquisitions are Realty Income's other growth driver. Its strong balance sheet enables it to invest billions of dollars each year into new income-producing real estate. Realty Income expects its growth drivers to increase its FFO per share by 4% to 5% annually. That should enable it to continue growing its dividend.
A low-risk gamble
NYSE: VICI
Key Data Points
Vici Properties is another REIT that yields around 6%. It has put together a solid track record of dividend growth. It increased its payout by 6.4% last year, its sixth consecutive annual increase since its formation.
The company focuses on gaming and other experiential properties secured by very long-term net leases with tenants that operate the facilities. Those leases supply it with stable and steadily rising cash flow. Nearly half of its leases link rent with inflation, which will rise to 96% by 2035.
Vici Properties' other growth driver is new investments. The company committed to investing nearly $2 billion across several opportunities last year, including its first international investments and expanding into additional non-gaming experiential property classes. That has continued this year. It agreed to fund the development of a Margaritaville Resort in Kansas City. It has the option to acquire that property and several sports-related facilities owned by the same developer. These and future investments should enable Vici Properties to continue increasing its dividend.
High-quality high-yield stocks
Brookfield Infrastructure, Realty Income, and Vici Properties can help me achieve my income goal. They pay ultra-high-yielding dividends that are on a very sustainable foundation, and they should be able to continue growing their payouts in the future. These characteristics will help me eventually produce enough passive income to cover all my expenses.
