Passive income is a valuable tool that can provide financial flexibility and independence. By generating income from sources that require minimal effort to maintain, individuals can reduce their reliance on traditional employment to meet their financial needs. One popular method of generating passive income is through investing in dividend stocks, which can provide a steady stream of income without the need for active management.
Investing in dividend stocks can be a straightforward way to earn passive income. For example, investing $1,000 in an S&P 500 index fund with a dividend yield of approximately 1.2% would yield around $12 in passive dividend income annually. However, there are stocks with higher dividend yields that can produce even more significant annual dividend income for investors looking to build a lucrative passive income stream.
One option for investors seeking high dividend yields is AGNC Investment, a real estate investment trust (REIT) that focuses on investing in pools of residential mortgages backed by government agencies like Fannie Mae. These agency mortgage-backed securities (MBSes) have low-risk profiles due to government protection against credit losses, making them lower-return investments with yields in the low to mid-single digits. AGNC Investment aims to boost returns by using leverage to purchase more MBSes, resulting in a current yield of over 14%. While this higher-yielding payout comes with increased risk, AGNC Investment has maintained its dividend for nearly 60 months and expects to continue providing investors with a lucrative income stream.
Another solid option for generating passive income is NNN REIT, which focuses on owning single-tenant net lease retail properties such as automotive service locations, convenience stores, and restaurants. Net leases provide stable rental income as tenants cover operating expenses, resulting in a 6% dividend yield for investors. NNN REIT has a track record of increasing its dividend payment for 35 consecutive years, showcasing its commitment to providing reliable income for investors.
EPR Properties is another REIT worth considering for passive income generation, as it focuses on experiential real estate like movie theaters, eat-and-play venues, and attractions. Despite suspending its dividend during the pandemic, EPR Properties has since reinstated and increased its dividend, which currently yields over 7%. The REIT plans to invest in additional income-generating experiential real estate to grow its portfolio and cash flow, enabling it to continue increasing its high-yielding dividend in the future.
Investing in higher-yielding dividend stocks like AGNC Investment, NNN REIT, and EPR Properties can provide investors with the opportunity to generate more significant passive income compared to stocks with lower yields. While higher-yielding dividend stocks may carry more risk, the potential for a lucrative income stream makes them an attractive option for investors looking to boost their passive income. By carefully selecting dividend stocks with strong track records and growth potential, investors can build a diversified portfolio that generates reliable passive income over time.
