I'm on a mission to build out my passive income to the point where it can cover my expenses. I still have a long way to go. However, like the tortoise, I make slow and steady progress each month by investing more money into assets that generate passive income.
A key aspect of my passive income strategy is investing in dividend stocks. I tend to focus on companies that pay a steadily rising, higher-yielding dividend. VICI Properties (VICI +0.17%), Brookfield Infrastructure (BIPC +0.00%) (BIP 0.54%), and Camden Property Trust (CPT 0.29%) top the list of high-yield dividend stocks that I'm excited to buy more of in May. Here's why I believe they can supply me with a lucrative and growing stream of dividend income.
Betting that the house will always pay its rent
NYSE: VICI
Key Data Points
VICI Properties' dividend currently clocks in at a 5.8% yield. That's several times higher than the S&P 500's dividend yield (around 1.4%).
The real estate investment trust (REIT) backs that payout with a very strong financial profile. It owns a high-quality portfolio of experiential real estate (including some of the top gaming properties on the Las Vegas Strip) that generates very stable rental income backed by long-term net leases. It pays a conservative portion of its steady income in dividends (75% of its adjusted funds from operations or FFO). On top of all that, it has an investment-grade balance sheet with a low leverage ratio and long-term, fixed-rate debt.
VICI Properties' strong financial profile gives it the flexibility to invest in expanding its portfolio. The REIT secured $1.8 billion of new investments last year, including acquiring 38 bowling entertainment centers from Bowlero and providing funding to build an indoor water park and a couple of destination golf courses. The company's growing portfolio has enabled it to increase its dividend steadily. It has raised its payout every year since its formation, growing it at a 7.6% compound annual rate since the end of 2018. With ample financial flexibility and a long growth runway, VICI Properties should be able to continue pushing its payout higher.
The steady upward trend should continue
NYSE: BIP
Key Data Points
Brookfield Infrastructure currently yields just under 6%. The global infrastructure giant backs that payout with very stable cash flow. Roughly 90% comes from long-term contracts or regulated rate structures, with about 85% protected from or indexed to inflation. Meanwhile, it has a conservative dividend payout ratio (60% to 70% of its FFO) and a solid investment-grade balance sheet with predominantly long-term, fixed-rate debt.
The company's organic growth drivers (inflation-linked rate increases, volume growth as the global economy expands, and capital projects) should fuel 6% to 9% annual FFO per share growth over the long term. The company expects its capital recycling strategy (selling mature assets to fund higher-return new investments) to drive its FFO per share growth rate into the double digits over the next several years.
Brookfield expects to grow its dividend at a 5% to 9% annual rate over the long term. That should continue its excellent track record of dividend growth (2024 is its 15th straight year of increasing the dividend).
Cashing in on growing housing demand
NYSE: CPT
Key Data Points
Camden Property Trust currently yields 4.1%. The residential REIT generates durable income as tenants pay their rent each month. Meanwhile, it has a very reasonable dividend payout ratio (around 61% of its core FFO per share this year). Camden also has one of the strongest balance sheets in the REIT sector.
The company's rental income tends to rise each year as rents across its apartment portfolio increase. It's in a strong position to raise rents because it focuses on owning apartments in metro areas where the population and jobs are growing at above-average rates. That keeps occupancy high, enabling the REIT to invest in building new apartment communities.
Camden is currently building four additional communities, including its first two single-family rental home communities. The company has several other projects in the pipeline that it can start building as market conditions warrant. It has ample financial flexibility to move forward with those projects and make acquisitions (developable land and operating communities) as attractive opportunities come along.
These growth drivers should enable Camden to continue increasing its dividend. The payout has grown by about a third since 2018.
These high-yielding payouts should keep heading higher
VICI Properties, Brookfield Infrastructure, and Camden Properties pay high-yielding dividends. Because of that, I can earn more income from every dollar I invest in these dividend stocks. They also have excellent track records of increasing their payouts, which seems likely to continue. That's why I can't wait to buy more shares of these top-notch passive income producers in May.
