In this article we provide the list of 10 best dividend stocks for passive income. Click to skip ahead and see the top 5 dividend stocks for passive income.
As the world has witnessed a tremendous change in the last half century, financial sector also took its fair share from it and has evolved drastically. Naturally, we tried continuously to adopt to change, if not to conquer it. These changes affected our daily life, habits and the way we act, including the decisions we made for our investments.
There have been many surveys and research on the question of “Was life better in the old days?”. Needless to say, on this discussion both sides may have valid arguments and I am not intended to dwell on it here. But it is sure that; many things have completely disappeared, while some have augmented or changed shape. And due to this change a lot of novelties came up as by-products. Investment rituals and decision-making process are not exceptions to that. Even in the last two decades many complex instruments and assets have been introduced to the markets. Financial knowledge switched from basic algebra to rocket science and engineering. There are thousands of companies and dozens of instruments to invest.
In the good old days, investing in savings accounts or long-term bonds were probably the best thing to do for low risk and steady returns. And letting your savings grow passively via compound interest was the right investment strategy. However, today short-term interest rates are near zero and risk-free assets aren’t really risk free anymore. Long-term government bonds can deliver large “real” losses if inflation picks up in the future. This means income investors need an active strategy to manage their funds. We believe dividend stocks with long histories of dividend increases year in year out are the best alternative for passive income investors.
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In this article we will present you the top 10 stocks from the U.S. Dividend Champions that have been increasing their dividends annually for the last 25 years. This is a necessary condition if you are looking for regular and consistently growing passive income, but we are going to impose additional criteria to identify the best dividend stocks for passive income. First, we added two more filters: at least 3% annual yield and at least an annual increase of 5% in dividend payout. The results were impressive, but one more touch was needed to rank 10 best dividend stocks. We counted the number of bullish hedge fund positions in each stock and used this statistics to identify the best dividend stock for passive income. Most hedge funds don’t invest in dividend stocks for their dividend yield. Hedge funds invest in stocks with huge upside potential. Once in a while some of these stocks happen to be high dividend stocks that have been increasing their dividend payouts consistently. By investing in these dividend stocks we not only hope to capture increasing annual dividend payments but also large capital gains.
By the way Insider Monkey has been very successful at identifying stocks with high upside potential using hedge fund sentiment data. Our monthly newsletter’s stock picks returned 113% since March 2017 and outperformed the S&P 500 Index by more than 66 percentage points (see the details here). Some of the stocks we picked in our monthly newsletter were dividend stocks that delivered triple digit returns over the last 4 years.
Having said that, now let’s have a closer look to 10 best dividend stocks for passive income:
10 – Cullen/Frost Bankers Inc. (NYSE:CFR)
The list starts with a financial holding company headquartered in San Antonio. Cullen/Frost Bankers has managed to enter our best dividend stocks for passive income list despite its relatively small market cap. As of this year’s third quarter report, CFR had $40.1 billion in assets, which makes it one of the 50 largest banks in the United States. CFR provides a wide range of banking, investments and insurance services to businesses and individuals across Texas and has a presence in the market since 1868.
CFR shares currently trade for $83.16 and have a trailing P/E of 15.6. Current dividend yield is 3.42% and CFR’s board last month approved to increase its quarterly dividend to $0.72 from $0.71. We believe CFR’s board is a bit cautious right now because of the coronavirus pandemic. In 2019 the board increased the quarterly dividend from $0.67 to $0.71. We believe the growth rate in quarterly dividend will pick up again in 2021. Although financial results of the first nine month of 2020 are worse than the 2019 figures, the CEO of the company Phil Green states that: “Maintaining the philosophy and culture along with the sustainable, organic growth is a positive development in this unusual environment.” There were a total of 19 big hedge funds with bullish CFR positions at the end of September. The number of bullish hedge funds in CFR was only 13 at the end of June.
The stock at the ninth spot in our list is also from the financial sector and it is Cincinnati Financial (CINF). But it is in the insurance branch, rather than banking. And the other similarity is the number of hedge funds that picked this stock in the third quarter, which is also 19.
Cincinnati Financial had a $60.57 book value per share on September 30, 2020 and currently trade for $77.40. Based on this figure CINF’s trailing P/E ratio is 16. The stock pays a quarterly dividend of $$0.60 (increased from $0.56 earlier this year) and yields 3.10%. Although Income Statement figures for the three months ended in September are promising, nine months figure are still in the negative territory. Company’s chairman, president and CEO Steven J. Johnston commented: “… along with multiple hurricanes and wildfires, brought considerable loses to our policyholders. Confident in our balance sheet and risk management decisions, we were able to focus on what was important: outstanding claims service. Catastrophe events in the third quarter nearly tripled our 10-year average of 6.2 points. Elevated catastrophe losses alone explain the decrease in non-GAAP operating income…”
8 – Black Hills Corp. (NYSE:BKH)
The Black Hills Corporation conducts operations in the Electric – Gas Utilities, Power Generation and Mining segments. Among these operations the first two segments accounted for more than 90% of total revenues. The company was founded in 1883 and has increased its dividends for 50 consecutive years. I think that’s really remarkable. The company’s current quarterly dividend payment is $0.565 corresponding to an annualized dividend yield of 3.65%. The company increased its quarterly dividend by 5.61% earlier this year.
There were a total of 22 hedge funds with bullish positions in this stock. Billionaire Jim Simons’ quant hedge fund Renaissance Technologies had the biggest position in BKH among the 800+ hedge funds tracked by Insider Monkey. BKH is also favored by other quant hedge funds like DE Shaw and Two Sigma. Both funds are among the top 10 hedge fund holders of BKH’s stock.
7 – Leggett & Platt Inc. (NYSE: LEG)
This company also has deep roots. The Leggett & Platt Inc. was founded in 1883 to produce bedspring with the goal of offering the best sleep yet available. After a little bit of search, I realized that the modern growth era for the company goes back to 1960’s. Due to a strategy change, the company has assumed a leading role in manufacturing, marketing, and distribution capabilities on the consumer discretionary sector.
As of this year’s third quarter, Leggett & Platt had $4,663.8 million in total assets. When it comes to liabilities; short term debt comprises 20% of total assets, while long term debt covers the 52% of it. As a result, total equity with 28% share makes the financing side look balanced. Current dividend for the company is $0.40 and in annualized terms that corresponds to a 3.68% dividend yield. Dividend amount has increased 5.26% compared to the previous period. There were 26 hedge fund managers who found this stock worth investing. Among these 26 hedge funds Scopus Asset Management has a distant leading position.
6 – Essex Property Trust (NYSE: ESS)
Essex operates in the real estate sector. The company has been increasing its dividend payments annually for the last 26 years. Essex is a real estate investment trust (REIT) that acquires, develops, redevelops and manages multifamily apartment communities in supply constrained markets.
On 20th November 2020, the share price was $254.10 and P/E ratio in trailing twelve-month basis was 27.83. From the latest financial reports, I found out that the company “repurchased 121,260 shares of common stock totaling $26.6 million at an average price of $219.24 per share, inline with the stock buyback program.” Current dividend for the company is $2.08 and in annualized terms that corresponds to a 3.27% dividend yield. Compared to the previous period, quarterly dividend payment increased 6.54%. There were a total of 28 hedge funds with bullish ESS positions at the end of September.
One of the major roadblocks to Financial Independence is to put your source of livelihood on one source of income. Anything with option one creates high risk and is a major cause of stress when it’s uncertain. Thus if your only source of income is full-time job chances are high that you will postpone your financial independence. Worse of all is that this income lives and dies with your job. Thus If you have been racking your brains for ways to get multiple sources of income so you can protect yourself. Rack no more for today I will show you the answer.
What do you do to move from one source of income to multiple sources of income? And how do you ensure that you achieve Financial Independence?
To move from one source of income to multiple streams of income there are three things you must do. First, you must understand what you need to get started. Second, you must understand your multiple income options. And third, you must understand the critical success factors that lead to financial Independence. Below I explain these three points in detail.
To Create Multiple streams of Side Income you need an income-producing seed. There is no room for empty handedness in the corridors of wealth. So you must come with a seed if you want to create more wealth. So what seeds do you need to create multiple incomes? There are primarily two seeds. The First seed is the Money Seed and the second is the Scratch Seed. When you want to expand your source of income, you either use money to create more money or you create money from scratch
The money seed is thus the option that uses money to create more money. Money can reproduce money and the fastest way to reproduce money is to invest it. There are two places that money can be invested. The first is in an Investment vehicle and the second is in people. To be successful with investing you need a lot of money and you also need a financial independence plan. And for people investing to be successful, you need a people-based passive Income plan. But if you have limited amounts of money using money to make money is not the fastest option for you. The fastest option you have is to create more money from scratch.
The From Scratch seed is thus the only way to create money from scratch. This seed is not based on how much money you have but on how much of these three skills you have. These three skills are what I call the money-making skills. The first skill is Problem-solving skills also called creativity or innovation skill. The second skill is Relationship building skills also known as Networking skills. And the third skill is Marketing and sales skills. These three skills are the only skills in the world that can build wealth from scratch. It is the closest you will ever get to making money out of thin air. If you do not yet have these skills you need to develop them and if you need help developing these skills send an email to [email protected]
So now that you know what you need to get started. Let’s look at the broad options of side income that you have.
There are about nine paths to take if you want to create multiple streams of side income. The First seven paths are active sources of income. And the last two paths are the only two Passive Sources of income in the world. So let’s look at each of these paths in detail.
One of the ways to generate a side income is to create your own products and sell them in exchange for cash. The majority of people who do this do it in two ways. The first way is to start a full-fledged business and run it part-time. The second way is to start a side hustle that can be run part-time. Starting a full-fledged business and running it part-time is the fastest way to lose money. While a business has huge profit potential it requires full-time attention. I know this because there are no successful part-time businesses in the world. Businesses that are successful are run full time to thrive. A side hustle on the other hand is a better option if you develop Money making skills. One of the major problems of those who create their own products is convincing a lot of people to buy it. The majority of people focus too must attention on creating the product and developing Product creation skills. They pay little attention to developing Money making skills. Without successful marketing, it is hard to make money from your products or get rich in business. No matter how good your product is if you cannot sell it you will be broke. The best way to succeed in a side hustle especially one that is based on your own products is to master the art of product creation and money-making all at the same time.
Creating your own service is all about offering a set of skills in exchange for money. The bulk of Freelance professionals fall under this group. Again the problem with this source of income is that it requires money-making skills to be successful. While a lot of freelancers are good with freelancing they are terrible at marketing. Thus a lot of them suffer from a limited clientele base and projects that carry limited income opportunities. Some freelancers are good with marketing but they suffer overwhelm if they are still gainfully employed. Spreading yourself too thinly is the recipe for producing sub-optimal results. Freelancing requires an enormous time investment so you need to create more free time to make it successful. Even you outsource some of the work, you are burdened with supervision and the risk of not satisfying your customers. So unless you can create more free time and be good at marketing you become ineffective as a freelancer.
Selling other people’s products is another way of making extra income. This is where the salespeople, Agents, Franchisee, and Independent Marketers fall under. While this is a great source of side income, not everyone is good at it. The typical salesperson is uncultured, too pushy, and unwelcome to many people. Some of them sell products they don’t believe in or will not buy with their own money. Others make the mistake of limiting their income potential by taking job security under a particular organization. Good salespeople branch out on their own, use their skills to serve a lot of people, and diversify their income. They also achieve financial Independence faster this way. When selling other people’s products also involves buying these products with your own money. Chances are high that you may lose your money or get stuck with products you cannot sell. To succeed at selling other people’s products you must be good at marketing and relationship building. You must also choose products you believe in and are passionate about.
One of the ways to earn extra income is to sell or plug into other people’s services. A typical example is Uber. While Uber can be a great source of side income it has certain drawbacks. The first is that it is not scalable. There are only a limited number of cars you can have at the same time and this limits your income. Second, the income opportunity comes at a high cost. It requires massive work and time investment that can become unhealthy for your health and relationships. Combining a stressful 9-5 Job with a stressful weekend for a meager income especially when you have other options is not wise. The other way to reduce the direct time impact on you is to outsource your car to an Uber driver. This also comes with a lot of stress. Again there is a limited number of cars and no one can take care of your car as you do. So you can do Uber but try to outsource it may be on a hire purchase basis so you can focus on other sources of side income. And if you must do it yourself try to ensure it does not lead to damaging health conditions or hurt your relationships.
I will normally not talk about this kind of side income or recommend it but since it is becoming an option let me talk about it. Gambling is simply banking on luck or chance to become successful. It involves options like Stocks, Forex, cryptocurrency, Lottery, and so on. Although these options are supposed to be passive investments there are not. Because they require constant monitoring, trend analysis, monitoring of the news, and trading which is like a full-time job.
If you must gamble to make money make sure you are on the winning side. The ultimate winners in gambling are the owners of the gambling business. They control the process and are the last to lose money or go down. The Gamblers in contrast are the ultimate losers and here is the reason why. Gamblers take money from one uncertain source of income-their job. And invest in another source that is even more uncertain. They suffer anxiety, and financial stress because they bank their success on luck that is out of their control. The only way to succeed with gambling is to be on the money-making side.
Betting is also the same as gambling. When you bet you are guessing on an uncertain outcome which may or may not happen. Although there are a few lucky winners according to those who bet. No one knows when it will be your turn. And whether it will ever be your turn. Betting is a game of chance and you cannot bank your financial future on an uncertain game. I am yet to see a lot of billionaire gamblers aside from the owners of the gambling business. Maybe when I do I will update my perception.
One of the fastest ways to increase your source of income is to marry up and well. Marry well means marrying for financial Independence and not inheriting financial burdens. If marriage limits your income potential rather than enhances it you should rethink that marriage. The formula for financial success in marriage is this. Make sure two are better than one in all ramifications and not worse than one. If you marry only based on love, I hope that love pays your bills and shields you from financial stress. While you should love the person you marry, marriage is already hard to add financial stress to it. The key secrets here is to expand your income through marriage. Marrying a high-income partner is thus one of the simplest multiple income streams there is.
One of the fastest and most effective ways to fast-track your journey to financial independence is to become a relationship broker. It is one of my favorite side income. And how I exited the corporate world after working for seven short years. What does Relationship Brokering mean?
Relationship Brokering simply means serving as the middle man (Broker). Between someone that wants to solve a problem or meet a need called the Customer. And another person who can help them solve that problem called the Solution Provider. In exchange for profit sharing or an agreed reward.
Solution providers are generally business owners and they are the ones to pay you for your connections. All you have to do is make a sales connection happen virtually, passively, online, or offline. It’s a win-win for all parties involved. You get paid in cash and kind when you broker. First, you get paid referral income for your connections and second you get the goodwill of helping another human being. The business owner is also able to generate income without the huge cost of marketing. The customer gets the transformation and the help they need to move to the next level.
Of all the seven active sources of income, this is the only side income that is immune to economic downturns. You can successfully combine it without huge time and work investments. And you can do it without compromising your integrity. To succeed with relationship brokering you must develop the three money-making skills and broker what you love.
These are the seven active sources of side income you can explore. If you need want more information about how to earn 6 and 7 figure income brokering relationships send an email to [email protected]
Passive Sources of Side Income
There are only two ways to earn passive income in the word. The first way is through Investment-based passive income. This is the weaker passive income. And the second way is through the people-based Passive Income. This is the more powerful passive income.
The investment-based passive income is the income you earn when you put your money in an investment vehicle. It is income earned when you invest your active income to produce passive income. The higher the amount of active income you invest. The more solid passive income you will produce. The key to success with the investment based passive income is two-fold. The first is to invest in your financial Independence using a proven plan. And the second is to increase the amount of active income you invest. If you need help figuring out how to invest for Financial Independence. Send an email to [email protected]
The People-Based Passive Income is the income that you get from people working for you. It is the strongest passive income in the world and the one that can make you rich the most. Having other people work for you can be achieved in two ways. The first way is through a successful Business. And the second is through a Passive Income Money Making System. If you are not yet ready to start a business or if you are not yet financially independent. Venturing into the business world may not yet be for you. And here is why. First, you cannot succeed in business with execution money. And second, you need to pay your bills to stay focused. One of the best way to thus earn the people-based passive income as a working-class professional is to create a Passive income money-making system. The most effective way to do this is through the Relationship Brokering. It is possible to scale a relationship brokering business to earn passive income. All without increasing cost, work, or time investment. No other source of active side income has this advantage. Having other people work for you to expand your income opportunity without expanding your work is thus an excellent way to fast track your financial freedom. The secret key here is to be able to expand your income without expanding your work.
So that is it about the two types of passive income sources there is. Now let’s talk about the critical success factors that can hasten your financial Independence.
To achieve financial Independence through multiple streams of income there are five critical success factors to note. The First is that you must never combine two active income that requires full-time work at the same time. One of the sources of income will suffer and worse off, it will drain your liquidity. Second, you must never Exit your Job until you gain Financial Independence or have another reliable second income. There is no room for success in the business for hungry men. Third, you must never lose your savings and years of hard-work through gambling or unguided investment decisions. The Fourth is that you must put money to work through investing if you have money and focus on developing the High-income skills if you don’t have enough income. The fifth is that you must choose the side income that will give you the most desired results by looking at those people who are already earning from it. For example, I am yet to see Uber drivers that are rich and wealthy.
Research shows that over 90% of the world’s billionaires have multiple sources of income. If you really want to be wealthy then multiple sources of income are the way to go. If you are tired of getting a single paycheck every month and want to create multiple sources of income within a reasonable time send an email to [email protected]