I'm on a mission to become financially independent through passive income. My strategy is to continually invest in income-generating assets to steadily grow my passive income to the point where it can cover my basic living expenses.
Investing in high-yielding dividend stocks is a core aspect of my strategy. I buy more shares of top high-yielding dividend stocks any chance I get. Two high-yield dividend stocks that I just can't stop buying this year are PepsiCo (PEP 0.46%) and Vici Properties (VICI -0.29%). Here's why I think they are two of the top options to buy for passive income these days.
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A satisfying income stream
PepsiCo's dividend yield is approaching 4.5% because of a big slump in its stock price this year. That's a very attractive level for the food and beverage giant. It's about three times higher than the S&P 500 at less than 1.5% and its highest level this decade.
The company has a sparkling record of paying dividends. PepsiCo recently raised its dividend by another 5%, extending its growth streak to 53 straight years. That qualifies it as an elite Dividend King. The company has grown its payout at an impressive 7.5% compound annual rate over the past 15 years.
PepsiCo's leading portfolio of consumer brands generates lots of cash flow. That gives it the money to invest in growing its business and pay an attractive and rising dividend. The company is investing heavily in things such as product innovation, manufacturing capacity expansions, and productivity enhancements to organically grow its revenue and margin. PepsiCo expects these investments will increase its revenue at a 4%-6% annual rate while boosting its earnings per share at a high-single-digit rate.
The company also has a strong balance sheet, which gives it the flexibility to make acquisitions as opportunities arise. It has made several deals in recent years to accelerate the transformation of its portfolio to healthier options, including healthier-soda maker Poppi, fresh dips and spreads brands Sabra and Obela, and authentic, better-for-you food product maker Siete. These acquisitions will enhance its long-term growth, putting PepsiCo in a stronger position to continue increasing its high-yielding dividend.
A low-risk bet on a high-yielding income stream
Vici Properties' dividend yield is over 5%. The real estate investment trust (REIT) backs that payout with a steady and growing rental income stream.
The REIT owns one of the largest portfolios of market-leading gaming, hospitality, entertainment, wellness, and leisure destinations. It owns 54 gaming properties, including Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas. Vici also owns 39 other experiential properties and has invested in several real estate-backed loans.
Vici leases its owned properties to tenants that operate the facilities under long-term triple net leases (NNN). An increasing percentage of its leases escalate rents at rates tied to inflation. Forty-two percent of them do this year, and that number will rise to 90% by 2035. As a result, Vici collects very stable and steadily increasing rental income.
The REIT pays out about 75% of its cash flow in dividends, retaining the rest to invest in new income-generating experiential real estate. Vici Properties also has an investment-grade balance sheet, giving it additional financial flexibility to make new investments. The company's most recent investments were a $300 million mezzanine loan to support the development of One Beverly Hill, a landmark luxury mixed-use development, and up to $510 million of development funds to build the North Fork Mono Casino & Resort.
Vici Properties' growing portfolio enables the REIT to steadily increase its high-yielding dividend. It has raised its payment in all seven years since its formation. It has grown its payout at a 7.4% compound annual rate, which leads its NNN REIT peers with a 2.3% compound average dividend growth rate during that period.
Ideal passive income stocks
PepsiCo and Vici Properties are great stocks to buy for passive income. They pay high-yielding dividends backed by strong financial profiles. They also have excellent records of growing their dividends, which should continue. That's why I recently bought more shares of this duo and probably won't stop adding to my positions anytime soon.
