Looking to Start Making Passive Income? Buy These 3 High-Yield Dividend Stocks First.
Key Points
Brookfield Infrastructure has increased its dividend every year since its formation 17 years ago.
Realty Income has raised its monthly dividend 134 times since going public in 1994.
Verizon has grown its dividend for 19 straight years.
- 10 stocks we like better than Realty Income ›
Investing in dividend stocks is one of the simplest ways to generate passive income. Many companies pay dividends, with several offering attractive yields. However, not every high-yielding dividend stock will provide a sustainable passive income stream.
Here are three high-yielding dividend stocks ideal for those looking to start generating passive income. They have an excellent record of paying a growing dividend, which should continue.
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Brookfield Infrastructure
Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) operates a globally diversified portfolio of critical infrastructure assets. It focuses on owning assets in the utilities, transport, midstream, and data sectors secured by long-term contracts and government-regulated rate structures. Those frameworks provide it with stable, durable cash flows.
The infrastructure company currently yields over 4%, several times higher than the S&P 500's 1.1% dividend yield. Brookfield Infrastructure has increased its dividend in each of its 17 years as a public company, growing the payout at a 9% compound annual rate. The company aims to increase its dividend at a 5% to 9% annual rate over the long term.
It's in a strong position to achieve that goal. Brookfield Infrastructure estimates that its organic growth drivers, which include inflation-indexed rate increases, volume growth as the global economy expands, and expansion projects, will deliver 6% to 9% annual growth in funds from operations (FFO) per share. Meanwhile, acquisitions should push its long-term FFO growth rate above 10% annualized.
Realty Income
Realty Income (NYSE: O) is one of the world's largest real estate investment trusts (REITs). The company owns a diversified portfolio of more than 15,500 retail, industrial, gaming, and other properties across the U.S. and Europe. It invests in properties secured by long-term net leases with many of the world's leading companies. Those leases supply it with very stable rental income.
The REIT pays a monthly dividend that currently yields more than 5%. Realty Income has increased its dividend 134 times since its public market listing in 1994, growing it at a 4.2% compound annual rate. It has raised its payment for 114 consecutive quarters and 31 straight years.
Realty Income is in a strong position to continue increasing its dividend. It has a conservative dividend payout ratio, fortress balance sheet, and a growing list of strategic partners, giving it ample financial capacity to continue expanding its portfolio. Meanwhile, the REIT sees a $14 trillion total addressable market, giving it a very long growth runway.
Verizon
Verizon (NYSE: VZ) is a leading mobile and broadband provider. The company generates recurring revenue by delivering these vital services to customers.
The telecom giant currently offers a dividend yielding nearly 6%. Verizon has raised its payment for 19 consecutive years.
Verizon's dividend costs it about $11.6 billion annually. It generates plenty of cash to cover that payout. The telecom giant is on track to produce at least $21.5 billion in free cash flow this year, after funding capital expenditures of up to $16.5 billion to maintain and expand its networks. That's a 7% increase from last year. Verizon uses its surplus cash to maintain its balance sheet strength and repurchase shares (at least $3 billion planned for 2026). The company's growing free cash flow should support continued dividend increases.
Core income holdings
Brookfield Infrastructure, Realty Income, and Verizon are ideal dividend stocks to buy for passive income. They generate very stable cash flow to support their high-yielding dividends and continued growth. Their combination of stable cash flows, higher-yielding dividends, growth track records, and financial strength makes them some of the first dividend stocks to buy if you're seeking to start generating some passive income.
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Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, Realty Income, and Verizon Communications. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Brookfield Infrastructure Partners and Verizon Communications. The Motley Fool has a disclosure policy.
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