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Best passive income investments4/14/2023 ![]() In other words, Mastercard boosted its dividend roughly 30x over the past ten years. However, that same investment is now yielding $640 per year in dividends. If you invested $10,000 in MA stock then, you would have gotten $20 in annual dividends. In 2011, MA stock was yielding a miniscule 0.2% per year. But it’s actually a perfect example of how passive income streams grow over time. I know a lot of you are going to look at Mastercard, see the 0.5% current dividend yield, and think this is a crazy pick. Source: David Cardinez / ĥ-Year Compounded Dividend Growth Rate: 19.1% Hormel is just now making a big move into international markets, which should pave the way for at least another decade of steady, double-digit dividend growth. This allows it to take an aggressive posture and grow the business during economic downturns, such as last year’s pandemic. Not only are the company’s meat, nut and Mexican cuisine products recession-proof, Hormel also has one of the strongest balance sheets in its industry. That’s pretty impressive for an extremely low-risk business such as this one. A buyer of the stock in 2011 is now getting nearly 7% a year on their purchase. While HRL stock rarely yields more than 2% at the time of purchase, with 12% annual dividend increases, the passive income builds dramatically. Yet, management quietly grinds out roughly 10% earnings growth annually over the decades, and that translates into big dividend increases. Few people would look at a packaged-foods company like this as a rock star performer. Hormel Foods is a great example of steady, consistent dividend growth. Here are 10 such income stocks that should reward investors with speedy dividend growth in future years:ĥ-Year Compounded Dividend Growth Rate: 12.1% There are certainly exceptions, but those sorts of firms tend to lead the way. This helps show the power of increasing dividends and passive income streams over time.Ĭompanies that work best for this type of investing have large moats, operate in stable industries and have strong consumer brands. This tells you the dividend yield you’d get today if you bought a given stock in 2011. Second, we’ll consider 10-year yield-on-cost. At 15%, it doubles every five years, and so on. For a quick metric, consider that at a 10% growth rate, your dividend income doubles every seven years. Compounded dividend growth is the annual percentage increase that a company gives you over time. The metrics I’ll use here are compounded dividend growth rate and yield-on-cost. ![]() As such, this list emphasizes companies that can quickly increase your dividend income over time. In other words, when you’re thinking about a passive income stream, concentrate on how quickly it grows, not just how large it is at the beginning. And, not surprisingly, a company that can grow its dividend that quickly also tends to have a strong share-price performance. ![]() On the other hand, if you buy a stock that yields 2% today but grows at 18% per year, by 2030, it will be yielding roughly 10% on your cost. Meanwhile, your real income would decrease over time as inflation takes its toll. If you buy a stock that yields 6% today but it never hikes its dividend, it will still be yielding 6% in the future. It’s important to emphasize that passive income streams come from dividend growth. As a result, income stocks are a great place to look instead. Still, bonds and bank savings accounts have proven inadequate for generating yield in recent years. This will be welcome relief for investors that need some income. It looks like the Federal Reserve is finally heading toward some interest rate hikes in 2022 or 2023.
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