Investing in dividend stocks is one of the easiest ways to generate passive income. Some companies have such excellent track records of paying sustainable and growing dividends that their investors can buy and hold them for years without paying much attention.
Three companies with elite dividend track records are Chevron (NYSE: CVX), Consolidated Edison (NYSE: ED), and National Retail Properties (NYSE: NNN). Add in their higher dividend yields of at least 3% — roughly double the S&P 500’s 1.6% dividend yield — and they’re ideal for those seeking to earn passive income.
The fuel to remain elite
Oil giant Chevron delivered its 35th consecutive year of increasing its dividend earlier in 2022. That puts the S&P 500 member into the elite class of Dividend Aristocrats. It’s one of only two oil stocks in that group.
Chevron’s top financial priority is sustaining and growing its dividend. The company has increased its payout at a 6% compound annual rate over the last 15 years. That’s impressive, considering all the volatility in the oil sector during that time.
Chevron expects to continue growing its dividend — which currently yields slightly more than 3% — in the future. The energy company is investing heavily to expand its traditional and lower-carbon energy businesses. That will enable it to meet the world’s energy needs today and in the future while growing its cash flow. Add in its strong balance sheet and a steadily declining share count as it repurchases stock, and Chevron should have plenty of fuel to continue growing its dividend in the future.
The power to become dividend royalty
Consolidated Edison delivered its 48th straight year of increasing its payout in 2022. That’s the longest period of consecutive dividend increases for any utility in the S&P 500. It puts Consolidated Edison squarely in Dividend Aristocrat territory and only a couple of years away from the even more elite group of Dividend Kings.
The utility should have the power to continue growing its dividend — which yields 3.5% — in the future. It has a reasonable dividend-payout ratio of 60% to 70% of its adjusted earnings. That gives it a cushion while allowing it to retain earnings to finance capital projects. Consolidated Edison also has a solid investment-grade credit rating. The utility recently agreed to sell its clean energy business in a deal that will raise $6.8 billion, strengthening its balance sheet.
Consolidated Edison’s financial flexibility will allow it to continue investing in its core utility businesses. The company expects to spend $15.7 billion through 2024 on safety and reliability projects and green investments. These investments will grow its earnings in the future, giving Consolidated Edison the power to continue increasing its dividend.
The flexibility to continue expanding
National Retail Properties has increased its dividend for 33 consecutive years. That’s the third-longest streak in the real estate investment trust (REIT) sector. That upward trend in the dividend — which currently yields 4.9% — should continue.
National Retail Properties has a low-risk strategy that delivers consistent growth. It owns a large and growing portfolio of retail properties largely resilient to the pressures of e-commerce or economic downturns, like convenience stores, auto service, and restaurants. It leases its properties under long-term, triple net leases (NNN), making the tenant responsible for building insurance, maintenance, and real estate taxes. These leases also feature annual rental-rate escalation clauses. Those features enable National Retail to generate steadily rising rental income.
Meanwhile, the REIT pays out a conservative portion of its cash flow via the dividend (70% of its funds from operations (FFO) in the third quarter). That gives it some breathing room and allows it to retain cash to fund new investments. National Retail also has a strong investment-grade balance sheet, giving it additional financial flexibility for making acquisitions. That combination of rising rental rates and a growing portfolio should enable National Retail Properties to continue increasing its dividend.
Rock-solid ways to collect dividend income
Chevron, Consolidated Edison, and National Retail Properties are great dividend stocks. They’ve steadily grown their payouts, giving their investors more passive income each year. That should continue in the future. Add in their above-average yields, and they’re ideal stocks for those seeking to generate passive income.
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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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