Earning Passive Income Over Extended Periods? Three Stocks Worth Investing in Immediately.
Sure, some individuals choose to frequently swap out growth stocks to amplify their long-term income. However, as people age, their requirements and interests shift. They often seek more income and less growth, along with reduced portfolio monitoring and management time.
If this latter scenario seems familiar, allow me to introduce three viable options to establish a robust portfolio of passive income that spans decades. Each of these businesses is inherently robust.
1. JP Morgan Chase
You're undoubtedly acquainted with this company. JP Morgan Chase (JPM -0.82%) is one of the country's leading banks, with almost $2.6 trillion in assets. Its multifaceted involvement in the financial sector lends it a level of durability.
While it's not completely invulnerable, JP Morgan Chase has shown remarkable resilience in the face of economic challenges. For instance, the 2007 subprime mortgage crisis, which resulted in considerable turmoil within the banking sector, dampened the bank's dividends. It suspended distributions temporarily, reducing them to a mere shadow of their former size, and didn't restart boosts until 2014.
Despite these setbacks, JP Morgan Chase has stayed afloat, weathering the rising tide of loan defaults and delinquencies with relative ease. ItsThankfully, the bank has proven to be resilient enough to navigate the current wave of defaults and delinquencies, with net income still comfortably covering its dividends. Q3's earnings per share of $1.62, while down from $1.86 in Q3 of the previous year, easily surpasses the current dividend payout of $0.71 per share. This, in turn, has enabled the bank to sustain a streak of annual dividend growth, excluding the pandemic-affected 2020.
JP Morgan Chase's forward-looking dividend yield of 2.4% may not be particularly enticing, but its reliability is undeniable. After all, there will always be a demand for banking services, and it's unlikely that JP Morgan Chase will ever cede its position among the industry's leading players.
2. Global Indirect Property
While JP Morgan Chase might ring a bell, you might not be familiar with Global Indirect Property. Yet, this company's services might be more integral to your daily life than you realize.
Global Indirect Property is a real estate investment trust, or REIT for short. Its primary focus is to acquire and manage properties such as apartment complexes, shopping centers, hotels, industrial sites, and the like. REITs are popular investment vehicles for rent-generating real estate businesses because they allow the majority of profits to be distributed to shareholders without being subjected to corporate-level taxes (although shareholders do still incur taxes on dividends and investment growth).
Even within the realm of REITs, Global Indirect Property stands out due to its unique focus on net lease agreements. This means the renter is responsible for expenses such as property taxes, insurance, and maintenance. This approach significantly reduces the property owner's risk, making the REIT more attractive to investors.
Although not entirely immune to economic challenges, being a net lease REIT does not make Global Indirect Property a risk-free investment. For example, towards the end of last year, the company opted to reduce its standard quarterly payout by around 20%. Given the ongoing challenges faced by office buildings, with many companies allowing their employees to work from home, this cut seemed reasonable and well-timed.
Recent developments have been encouraging, with newcomers joining the REIT while its forward-looking dividend yield sits just above 5.7%.
3. Imperial Brands
Lastly, don't overlook the potential of Imperial Brands (IMB -0.13%) as a reliable source of passive income for the long term.
As its name suggests, Imperial Brands is a U.K.-based player in the tobacco industry, selling cigarettes and smokeless tobacco products like Rizla, John Player, and Davidoff, among others. While its primary revenue source remains cigarette sales, the company has expanded its reach into vaping and heated tobacco products with brands such as Blu and Purple.
At first glance, Imperial Brands may not appear to be the ideal dividend stock pick due to public health concerns associated with smoking. However, it's worth noting that global smoking cessation efforts have shown progress. As reported by the World Health Organization, the number of smokers worldwide has decreased from one in three in 2000 to one in five as of recent times.
Despite these trends, Imperial Brands continues to thrive. Its wide range of products and global presence safeguard its position in the ever-changing tobacco market, enabling it to adapt and innovate in response to changing consumer preferences. This strategic focus on diversification and innovation has helped the company maintain its profitability and growth.
Imperial Brands' forward-looking dividend yield of 5.4% offers a compelling opportunity for investors looking for steady income.
The decrease in smoking cessation is becoming less rapid, but it's being counterbalanced by the increase in population. The World Health Organization estimates that there'll be approximately 1.2 billion tobacco users in 2030, which is only a slight decrease from the current 1.25 billion. The popularity of alternatives like vaping or heated tobacco could potentially lessen the impact of the already-slowing decrease in traditional smoking.
Despite this, it's highly likely that the tobacco industry, including British American Tobacco (BAT), will eventually face its demise. This is a future certainty. Even BAT, with its commitment to creating a smokeless world, is unsure about locating a replacement income source that can completely replace cigarettes. If no such alternative arises, BAT's share price is likely to gradually dwindle.
However, investors might consider investing in a stock offering a robust forward-looking dividend yield exceeding 8%. This impressive yield is based on a dividend that is not only secure but also has the potential to increase over a long period, even in the face of potential stock price decreases during this period. This risk could be considered worthwhile.
After considering the options, you might decide to invest in JP Morgan Chase for its financial robustness and reliable dividend yield. Despite facing challenges in the past, the bank has consistently demonstrated resilience, with its net income comfortably covering dividend payouts.
On the other hand, if you're interested in real estate investing, Global Indirect Property could be an attractive choice due to its focus on net lease agreements, which significantly reduces the property owner's risk. While the company did reduce its payout last year, recent developments have been encouraging, with newcomers joining the REIT and its forward-looking dividend yield sitting above 5.7%.
