There's nothing better than earning money without having to actively work for it. It's why dividend stocks are such an attractive investment for income-focused investors.
Not only do dividend stocks provide stable income through volatile markets, but the income you earn from these investments can grow substantially over time. Look at Realty Income (O 1.15%), Hannon Armstrong Sustainable Infrastructure Capital (HASI 0.54%), and Federal Realty Investment Trust (FRT 0.69%). All three companies have years of dividend increases under their belt and pay yields three times that of the S&P 500.
HASI Dividend Yield data by YCharts
If you enjoy collecting passive income, here's why three fool.com contributors believe these stocks are no-brainer buys for your portfolio right now.
Realty Income has diversified income streams with decades of dividend increases
Liz Brumer-Smith (Realty Income): Owning over 12,200 single-tenant commercial properties in Europe and the U.S., Realty Income is the king of net leases real estate investment trusts (REITs). The REITs business model is simply to buy single-tenant properties and lease them to high-quality tenants over long-term net leases.
This creates reliable and diversified income for the company with fairly low overhead -- the perfect combination for slow but consistent growth. In its nearly 30 years as a publicly traded company, the REIT has managed to grow its dividend payout on a compound basis of 4.4% per year. It's also raised its payout each quarter 102 times and provided a total return four times higher than the S&P 500 over the last 29 years.
The stock is down 11% over the last year as market volatility, concern over a recession, and rising interest rates impact the company. However, it's still seeing high demand for its property with its portfolio being 99% occupied, and expansionary efforts are still in full swing.
The REIT announced the acquisition of 185 net lease retail properties from CIM Real Estate Finance Trust, and it's partnered with Plenty Unlimited to fund indoor vertical farms. Today, Realty Income pays its dividends monthly, offering an attractive 4.7% yield.
HASI's dividend keeps growing as it funds green energy innovation
Kristi Waterworth (HASI): Passive income stocks for me are a complete "set it and forget it" situation. I want companies that have a solid dividend history and that are constantly looking to the future for new ways to increase their income and opportunities. So, when it comes to passive income, Hannon Armstrong Sustainable Infrastructure Capital (HASI) is among my favorites in the REIT world.
And, now that it's down almost 38% from its August 2022 highs as of April 5, 2023, its dividend yield is a whopping 5.67%, a higher return than you'd see from something like a CD, even as interest rates move higher.
HASI's mission is to help fund the world's sustainable infrastructure by lending capital to government, residential, and commercial projects that include solar power, wind power, and other types of green infrastructure. It's not a very sexy job, but someone has to do it. HASI is constantly looking for opportunities to make the world greener and cleaner, while also turning a profit. For example, in March 2023 HASI provided $30 million in capital to help Bioenergy Devco develop facilities that turn organic material, like food waste, into renewable natural gas.
HASI has been a consistent dividend payer for years, from its first irregular dividends in 2013 to its regular quarterly dividends that started in 2014 of $0.22. Q1 2023's dividend was $0.395, which is an almost 80% dividend increase in just nine years. HASI has never cut its dividend, though there has been a year or two when it didn't grow.
It predicts that distributable earnings per share will continue to grow through 2024 at a compound annual rate of 10% to 13%, and the dividend at a compound annual rate of 5% to 8% per year through the same period.
Because HASI has so much coming into its pipeline, a wide range of projects to help diversify its energy and sustainability project portfolio, and a thoughtful leadership team, it's difficult to see any way that this rising star of the energy industry won't succeed. The company has set itself up for long-term success with a robust pipeline and is always looking for new angles in sustainability and green energy.
Although its stock price is down right now, I feel like this is just a great time to buy this stock at a discount. The company continues to move forward regardless of the stock market, and anybody who buys HASI right now is going to see a significant return on their investment in the form of dividends over the long haul.
Real estate royalty: This REIT has raised payouts for more than 50 straight years
Marc Rapport (Federal Realty Trust): It's good to be king, in this case as the only real estate investment trust (REIT) that lives on the list of 48 stocks that have raised their dividends annually for at least 50 years.
This Dividend King, in fact, has a record of 55 straight years of increases, fueled by a portfolio that now numbers 105 mixed-use, retail-anchored properties occupied by 3,100 tenants, and another 3,400 residential units.
Federal Realty is invested in only nine markets: Silicon Valley, Southern California, and Phoenix out west, Chicago in the middle, and then Miami, Washington, D.C., Philadelphia, New York, and Boston.
Market concentration can be a risk of its own, but this trust's focus on affluent areas of these markets has indeed served it long and well. It keeps the passive income flowing through periods of inflation, market crashes, and recessions, and even the pandemic when many of its retail REIT peers notably struggled.
Federal Realty stock is currently yielding about 4.4%, placing it among the higher-yielding members of the Dividend Kings list.
Analysts' consensus target price of $117 points to some upside there, but this is primarily an income stock and an ultra-reliable one at that. After all, who wants to be the executive team that has to put that streak to an end?
