I want to become more financially independent. That's why I'm steadily building my sources of passive income. I desire to eventually reach the point where my passive income covers my basic living expenses.
I steadily make progress toward that goal by investing in income-generating investments, like high-yield dividend stocks. I recently bought more shares of Brookfield Infrastructure (BIPC -0.07%) (BIP -0.09%), W.P. Carey (WPC -1.29%), and Vail Resorts (MTN -0.81%). Here's why I think they're excellent dividend stocks for generating passive income.
Image source: Getty Images.
A dividend growth powerhouse
Brookfield Infrastructure owns a globally diversified portfolio of critical infrastructure businesses. Its utility, energy midstream, transportation, and data assets generate stable cash flow. About 85% of its funds from operations (FFO) come from contracted or regulated rate structures with a weighted average remaining term of nine years. These frameworks also index 85% of its FFO to inflation or protect it from the impact of inflation.
The company pays out 60% to 70% of its stable cash flow in dividends. That payout currently yields over 4%. Brookfield also backs its high-yielding dividend with a strong investment-grade balance sheet. These features put it on a very sustainable foundation.
Brookfield also has an excellent record of growing its dividend, which should continue. It has raised its payout for 16 straight years, growing it at a 9% compound annual rate. The company aims to increase its payment by 5% to 9% annually in the future. Driving dividend growth will be a combination of inflation indexation, volume growth as the global economy expands, expansion projects, and accretive acquisitions. Brookfield expects those catalysts to fuel more than 10% annual FFO-per-share growth.
Steady passive income from real estate
W.P. Carey is a diversified REIT that owns operationally critical real estate in North America and Europe. It owns single-tenant industrial, warehouse, retail, and other properties primarily secured by long-term net leases with built-in rent escalations. Net leases generate very stable rental income because tenants cover all property operating costs, including routine maintenance, real estate taxes, and building insurance. Half of its leases link rents to inflation, while most of the rest increase rents at a fixed rate.
The REIT pays out 70% to 75% of its stable income via a dividend that currently yields more than 5.5%. It retains the rest to help fund new income-generating real estate investments.
Rising income from rent growth and its steadily expanding portfolio enable W.P. Carey to increase its dividend. The REIT has raised its payment every quarter since resetting the dividend in late 2023 following its decision to exit the office sector by selling and spinning off those properties. Before that, it had increased its dividend at least once a year for a quarter century.
A mountainous payout
Vail Resorts is a leading operator of ski resorts. The company generates increasingly recurring revenue via its season pass program. That business model has enabled the company to deliver steadily rising revenue and free cash flow, with compound annual growth rates of 8% and 10%, respectively, over the past decade.
The ski resort operator's stable and growing cash flow has enabled it to invest in expanding its resorts while also returning cash to shareholders. It has invested over $1.8 billion into its existing resorts over the past 10 years. Vail has also expanded its resort portfolio, spending $1.9 billion on acquisitions, including the Crans-Montana Mountain Resort in Switzerland in 2023 and three ski resorts in the Pittsburgh area in 2021.
Vail has also paid over $1.9 billion in dividends and repurchased $900 million of its stock over the past decade. While the company suspended its dividend during the pandemic, it brought it back as conditions improved and has been steadily increasing its payout, which is much higher than its pre-pandemic level. That dividend growth has helped push its yield above 5%.
Adding to my growing passive income streams
I routinely buy more shares of high-quality, higher-yielding dividend stocks with histories of increasing their payouts, including Brookfield Infrastructure, W.P. Carey, and Vail Resorts. As a result, my passive income continues to grow. This strategy has me steadily making progress toward my goal of becoming financially independent.
