Many investors dream of making passive cash flow from dividend stocks. The great thing about these investments is that they provide passive income without any work. With a rental property, you have to stay on top of tenants and property management. Dividend investing is much more passive and only involves monitoring your portfolio from time to time.
Many dividend stocks for passive income also increase their payouts each year. If you earned $1,000 in passive cash flow this year, it might turn into $1,100 the following year due to reinvestments and dividend hikes. That doesn’t even include if you put more money into those same stocks.
Investors seeking passive cash flow have to narrow their focus to the top dividend stocks for passive income. These are three stocks you may want to consider for passive income.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is a semiconductor giant that benefits from the growing importance of artificial intelligence. However, this innovative technology isn’t Broadcom’s only strength.
Semiconductors are in just about every piece of technology. Computers, smartphones, appliances, televisions, video game consoles and other tech rely on semiconductors. They are the building blocks for many things, and Broadcom continues to benefit from this industry.
Shares have gained an incredible 75% year-to-date and are up by 308.47% over the past five years. The recent surge has lowered the dividend yield but it still sits at 1.90%.
Broadcom has done a great job of rewarding long-term investors with frequent double-digit dividend growth rates. The company hiked its quarterly dividend from $4.10 per share to $4.60 per share, marking a 12.2% year-over-year increase.
Broadcom has high-profit margins and regularly achieves revenue and earnings growth. The company is a leader in the industry and can generate plenty of passive cash flow in the years to come.
Waste Management (WM)
Companies come and go, but waste is forever. People have plenty of trash that needs to be managed. Waste Management (NYSE:WM) is one of the companies that manage trash through its environmental services. Shares are up by 9.2% year-to-date and have gained 82.9% over the past five years.
The company currently has a 1.65% dividend yield and a good history of dividend hikes. This year, the company raised its quarterly dividend from $0.65 per share to $0.70 per share. It’s a 7.7% year-over-year increase.
Waste Management closed the third quarter with a $1.63 diluted EPS. That’s close to 6% higher compared to last year and is more than enough to support the company’s dividend. The big gap between the dividend per share and the EPS supports more dividend hikes. Combine that with a growing business, and long-term investors can greatly benefit from this stock.
Waste Management isn’t the type of stock to outperform high-flying growth stocks. However, it is a reliable pick during volatile, uncertain times. People will always need companies like Waste Management to address waste in various areas.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) has been a steady performer in the clean energy industry. The company operates in several states but focuses on Florida. NextEra Energy’s Florida Power & Light Company division is the largest electric utility in the United States.
NextEra Energy has consistently raised the dividend at an impressive rate. This year, the company raised its quarterly dividend from $0.425 to $0.4675 which is a 10% year-over-year increase. The company has regularly initiated double-digit year-over-year dividend hikes.
Shares have hit a recent speed bump due to concerns about slower growth in the upcoming quarters. The dividend growth is likely to take a hit in the short run due to elevated interest rates and fewer investment opportunities for the company.
NextEra Energy is still achieving year-over-year revenue growth. The stock has endured a harsh 32% year-to-date drop but is up by 28% over the past five years. The recent downward pressure on the stock price has raised the dividend to 3.30%. NEE also trades at a 15 P/E ratio.
Although the short-term price performance doesn’t look reassuring, NextEra Energy is still an industry leader that can benefit long-term investors. The big drop presents a buying opportunity for people who can hold on for a few years.
On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
