Unlocking the secrets to long-term financial prosperity lies in strategic investments and the art of dividend stock selection. In the dividend income context, this article delves into seven cornerstone passive income stocks across diverse sectors. These stocks aren’t just about numbers; they represent progressive strategies of adaptability and foresight in an ever-evolving market landscape.
Imagine a tobacco giant strategically transitioning into smoke-free alternatives or an entertainment powerhouse flourishing through captivating content in the digital age. Imagine a telecommunications titan’s relentless pursuit of technological superiority or a real estate mogul’s nimble global expansion. Each stock unveils a narrative of resilience, innovation, and vision, painting a canvas of growth amid challenges and uncertainties.
Read more to explore how these seven passive income stocks carve their paths to sustained financial growth and enduring wealth creation.
Altria (MO)
One of the top passive income stocks to consider is Altria (NYSE:MO), which offers a forward dividend yield of 9.29%. The company’s strategic acquisition of NJOY demonstrates its focus on diversifying and expanding into the smoke-free alternative market, aiming to capitalize on evolving consumer preferences and regulatory shifts.
Additionally, the acquisition and subsequent focus on expanding ACE, NJOY’s pod-based e-vapor product with US Food and Drug Administration marketing authorization, represents a strategic move to tap into the growing smoke-free alternatives sector. The product’s compliance with US FDA regulations positions it favorably within an increasingly regulated landscape, potentially offering a competitive edge over non-compliant products.
Furthermore, Altria is making efforts to expand ACE’s distribution to approximately 42K stores, with a projected reach of 70K stores by year-end. This reflects a concerted push to increase market penetration. Hence, this expanded distribution enhances product availability and exposes ACE to a broader consumer base, targeting a significant portion of the e-vapor and cigarette volume in the US.
AT&T (T)
Another one of the top passive income stocks to buy is AT&T (NYSE:T), which has a dividend yield of 6.74%. The company experiences consistent customer growth across its wireless and fiber segments. The company has strategically expanded its customer base by offering superior technology and value propositions. For instance, in a quarter, AT&T achieved nearly 300K high-quality net additions in the fiber segment alone. This substantial growth is against the backdrop of muted household movement activity.
The company’s deliberate go-to-market strategy has yielded fruitful results in the wireless sector. Notably, it observed an impressive 468,000 postpaid phone net additions, showcasing the effectiveness of its customer acquisition strategies.
Fundamentally, average revenue per user (ARPU) is a critical metric indicating a company’s ability to extract value from its customer base. AT&T’s strategy to offer high-value plans and improve service quality has consistently increased ARPU. For example, the fiber segment experienced an impressive 9% year-over-year increase in ARPU in Q3 2023. Similarly, the postpaid phone ARPU reached $55.99 in the wireless sector, marking a $0.32 year-over-year increase.
Overall, this growth trajectory continues to validate AT&T’s competitive position and ability to attract and retain subscribers amid a highly competitive landscape.
Energy Transfer (ET)
Energy Transfer (NYSE:ET) has diversified operations across multiple segments, supporting a forward dividend yield of 9.03%. It’s another one of the top passive income stocks to own.
To begin with, Natural gas liquids (NGLs) and refined products—crude oil, interstate, midstream, and intrastate—contributed to segment-wise EBITDA growth. For instance, this segment’s substantial increase in adjusted EBITDA from $634 million (Q3 2022) to $1.1 billion (Q3 2023) is remarkable. Also, it indicates robust performance across transportation, storage, terminals, and fractionation operations.
Notably, there is an increase in NGL transportation volumes by 14% to 2.2 million barrels per day and a 9% rise in average fractionated volumes to 1 million barrels per day. Thus, this demonstrates the company’s ability to handle and deliver increased volumes efficiently. Moreover, a significant 20% growth in total NGL export volumes over Q3 2022 signifies Energy Transfer’s strong position in meeting international demand for NGLs, strengthening its global market presence.
The growth from $461 million to $706 million in adjusted EBITDA for the crude oil segment is noteworthy in the crude oil segment. Thus, the substantial increase to 5.6 million barrels per day, attributed to higher volumes on pipeline systems and the acquisition of Lotus assets, showcases the segment’s robust growth.
Disney (DIS)
Disney (NYSE:DIS) offers a forward dividend yield of 0.64%. Its streaming business, Disney+, has experienced substantial growth in its core subscriber base, reaching over 112 million by the end of fiscal 2023, with an additional nearly 7 million subscribers added in the last quarter alone.
This exponential growth is a testament to the platform’s popularity and the company’s ability to attract and retain a massive audience. The increase in subscribers is directly attributed to the success of several popular titles, such as Guardians of the Galaxy Vol. 3, The Little Mermaid, and Elemental. These content releases have significantly contributed to Disney’s ability to expand its subscriber base rapidly.
Additionally, the Experiences segment delivered significant growth in operating margins, reaching 22% in Q4 fiscal 2023. The segment witnessed robust operating income year-over-year growth of over 30% in Q4. Despite challenges and temporary closures in certain parks, the segment’s overall performance exhibited efficiency.
Finally, achieving such growth amidst challenges underscores Disney’s efficient operational strategies and capacity to deliver exceptional guest experiences, driving value growth within its Experiences segment.
Realty Income (O)
Realty Income’s (NYSE:O) consistent investment in high-quality real estate has sustained a 5.45% forward dividend yield. Its investments, totaling $2 billion during the third quarter, signify a robust investment strategy and make this company one of the top passive income stocks to buy. Critically, the company’s ability to engage in numerous transactions across diversified sectors demonstrates agility and a proactive approach to portfolio expansion.
Notably, a noteworthy portion of the investment, $1.4 billion, was sourced from international business at a 6.9% yield. Therefore, This suggests the company’s global expansion strategy and confidence in generating favorable returns from overseas markets.
Additionally, there is a diversity in transaction sizes, involving 34 sale-leaseback transactions and six deals over $50 million. This emphasizes Realty Income’s capacity to navigate varied deal sizes. Also, this flexibility speaks volumes about their capability to identify and close deals efficiently across different scales.
Fundamentally, the proposed merger with Spirit Realty represents a significant strategic move, valued at $9.3 billion. It’s expected to be immediately accretive to Adjusted funds from operations (AFFO) per share, laying a solid foundation for sustained earnings growth. Hence, the merger’s potential impact on diversification, market presence, and trading liquidity indicates a strategic alignment between the entities.
Wells Fargo (WFC)
Wells Fargo (NYSE:WFC) has showcased robust financial performance metrics. This is highlighted by impressive revenue growth and a 2.82% forward dividend offering. In Q3 2023, the company witnessed an 8% increase in net interest income (NII), signaling strong revenue generation. This growth was bolstered by strategic investments and higher interest rates, contributing significantly to the overall revenue surge.
Moreover, Q3 net income surged to $5.8 billion, marking a substantial increase from the previous quarter and the same period a year ago. This notable growth in profitability underscores the effectiveness of the company’s business strategies, cost management, and revenue enhancement initiatives. Additionally, the improvement in diluted earnings per common share indicates enhanced profitability. This aligns with Wells Fargo’s aim of generating higher returns for its shareholders.
Regarding return on tangible common equity (ROTCE), Wells Fargo showcased a year-over-year improvement. The uptick in ROTCE signifies the company’s enhanced efficiency in utilizing shareholders’ equity to generate profits. This metric reflects operational efficiency and effective capital utilization, portraying Wells Fargo’s ability to generate higher profits relative to its shareholder equity.
Exxon Mobil (XOM)
An energy giant with a 3.74% dividend yield, Exxon Mobil (NYSE:XOM) strategically focuses on Low Carbon Solutions (LCS). The company focuses on addressing environmental challenges while capitalizing on potential growth opportunities. For instance, the company projects an earnings and cash flow increase of roughly $14 billion over the next four years. This projection is crucial for understanding the anticipated financial impact of its low-carbon investments.
Additionally, ExxonMobil has a solid CapEx range for 2024 and beyond, allocated to traditional businesses and emerging sectors like lithium, hydrogen, biofuels, and carbon capture and storage. This demonstrates the company’s focus on diversifying revenue streams.
Looking at cost savings and efficiency gains sheds light on the company’s ability to balance its low-carbon investments with operational cost optimizations. Therefore, the $15 billion planned structural cost savings through 2027 compared to 2019 indicate the company’s efficiency-driven approach.
As of this writing, Yiannis Zourmpanos held long positions in T and DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
