Work smarter, not harder, the saying goes. One way to do that is with passive income, which is derived from ownership rather than labor or active involvement in an enterprise. One of the best ways for investors to create a stream of passive income is by owning stocks with healthy and dependable dividends.
Why Invest for Passive Income?
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Investing for income has many possible benefits:
- Diversifying your portfolio
- As a cushion for the unexpected
- Reduces stress and anxiety
- For long-term growth
- To provide financial freedom and security
We screened our 24/7 Wall St. dividend equity research database, looking for dividend-paying stocks that could fit the bill. The following seven combined could generate over $15,000 a year in passive income for an investment of $25,000 in each one.
B&G Foods
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- Stock: B&G Foods Inc. (NYSE: BGS)
- How many shares for $25,000: 2,260
- Dividend yield: 6.9%
- Annual passive income: $1,917.50
Shares of this New Jersey-based producer of food products, including the Cream of Wheat, Crisco, and Ortega brands, have outperformed other consumer staples stocks this year. Its share price is up more than 5% year to date, in part due to a boost following its fourth-quarter earnings report. However, note that the stock has overrun the consensus price target, and just half of the 10 analysts who follow the stock currently recommend buying shares. Could that change after B&G posts its first-quarter results in early May?
Cal-Maine Foods
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- Fund: Cal-Maine Foods Inc. (NASDAQ: CALM)
- How many shares for $25,000: 439
- Dividend yield: 3.3%
- Annual passive income: $2,310.00
This producer of shelled eggs for supermarket chains and foodservice distributors is based in Mississippi. Despite inflation and bird-flu concerns, fiscal third-quarter results were better than expected when reported earlier this month. The stock popped around 7% afterward but then retreated. Shares were last seen down marginally year to date, but still more than 19% higher than a year ago. The S&P 500 is about 21% higher year over year. The $62.50 consensus price target signals a 10% gain in the next 52 weeks. Yet, only two out of seven analysts recommend buying shares now.
EPR Properties
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- Stock: EPR Properties (NYSE: EPR)
- How many shares for $25,000: 612
- Dividend yield: 8.3%
- Annual passive income: $1,927.50
Last month, this Kansas City-based real estate investment trust (REIT) boosted its monthly dividend by a dime (more than 3%) per share. Its first-quarter results are due out very soon. The stock is down more than 9% in the past 90 days but less than 3% compared to a year ago. Only half of the 10 analysts who follow the stock recommend buying shares, although the $46.61 consensus price target suggests they see about 14% upside in the coming year.
Healthpeak Properties
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- Stock: Healthpeak Properties Inc. (NYSE: DOC)
- How many shares for $25,000: 1,329
- Dividend yield: 6.4%
- Annual passive income: $1,955.00
Last month, the company completed its merger with Physicians Realty Trust. The Denver-based REIT is an S&P 500 company that is focused on owning and operating health-care-related properties. It just posted its first-quarter results and declared a dividend. Shares are up more than 11% since the merger closed, and reaching the $21.36 consensus price target would be an additional gain of more than 13%. Analysts on average recommend buying shares, as their sentiment has improved post-merger.
MPLX
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- Stock: MPLX L.P. (NYSE: MPLX)
- How many shares for $25,000: 1,180
- Dividend yield: 8.3%
- Annual passive income: $2,265.00
Billionaire investor Bill Gross favors this high-yield dividend stock. The subsidiary of Marathon Petroleum announced its latest distribution last week. The share price is about 15% higher than at the beginning of the year and near a multiyear high. Note that the S&P 500 is up 7% or so year to date. All but one of the 17 analysts covering MPLX stock recommend buying shares, with seven of them rating it at Strong Buy. Their consensus price target is $43.77.
Nu Skin Enterprises
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- Stock: Nu Skin Enterprises Inc. (NYSE: NUS)
- How many shares for $25,000: 2,029
- Dividend yield: 1.9%
- Annual passive income: $2,200.00
A provider of beauty and wellness products, Nu Skin topped sales estimates in its fourth-quarter report back in February. Yet, shares dropped to a multiyear low of $11.84 afterward and were last seen down more than 36% year to date. Though the share price has trended lower for more than a year, the consensus price target is up at $14.50, and one analyst sees the stock at $15 per share in the next year. However, only three of six analysts covering the stock currently recommend buying shares. The sentiment has improved in the past couple of months, though.
Starwood Property Trust
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- Stock: Starwood Property Trust (NYSE: STWD)
- How many shares for $25,000: 1,278
- Dividend yield: 9.9%
- Annual passive income: $2,427.50
This is another high-yield REIT, this one focused on hotels and other commercial property and lending. The Connecticut-based firm topped fourth-quarter earnings estimates, and its first-quarter report is due soon. The stock is popular with hedge funds, and shares are off almost 2% since the fourth-quarter report. That is in the same neighborhood as the Dow Jones industrial average. Analysts are keen, with six of seven rating the stock a Buy. Their $22.21 mean price target represents over 13% upside potential.
$15,000 in Passive Income
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So, for a $25,000 investment split evenly between these seven diverse stocks, the investor creates a passive income stream of a little over $15,000 per year.
| Stock | Investment | Annual Income |
|---|---|---|
| B&G Foods | $25,000 | $1,917.50 |
| Cal-Maine Foods | $25,000 | $2,310.00 |
| EPR Properties | $25,000 | $1,927.50 |
| Healthpeak Properties | $25,000 | $1,955.00 |
| MPLX | $25,000 | $2,265.00 |
| Nu Skin Enterprises | $25,000 | $2,200.00 |
| Starwood Property Trust | $25,000 | $2,427.50 |
| Total | $175,000 | $15,002.50 |
Is a $175,000 investment a little too rich? Note that a $5,000 investment in each fund results in annual passive income of about $3,000, while $10,000 investments net $6,000 per year, and so on.
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