I’d love to be able to retire early. It’s not that I don’t want to work; I don’t want the stress of having to earn income to cover my living expenses.
My desire to become financially independent drives my investment strategy. My goal is to grow my passive investment income so that it will eventually cover my basic living expenses. That way, I won’t have to worry about working to pay the bills.
I strive to make progress toward my passive income target each month by investing in additional cash-flowing investments. A top priority of mine is buying high-quality, high-yielding dividend stocks. Three that I can’t wait to purchase more of this June are PepsiCo(NASDAQ: PEP), Rexford Industrial Realty(NYSE: REXR), and W.P. Carey(NYSE: WPC).
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PepsiCo stock currently yields more than 4%, roughly three times more than the S&P 500‘s less than 1.5% yield. The food and drink giant’s yield has been steadily rising over the past year. That’s due to the company’s continued dividend increases and a more than 25% slump in its stock price caused by the potential impact of tariffs and concerns about changing consumer tastes. PepsiCo recently raised its payment by another 5%, extending its growth streak to 53 years in a row. That’s kept it in the dividend nobility. It’s a Dividend King, a company with 50 or more years of annual dividend increases.
I love investing in high-yielding dividend stocks that grow their payouts, because they can help me reach my passive income goal faster. PepsiCo is in an excellent position to continue increasing its payout. The company expects its heavy capital investments (it reinvests more than 5% of its net revenue each year) to drive 4%-6% organic revenue growth and mid-to-high single-digit earnings-per-share growth.
The company is also investing in inorganic growth to accelerate its transformation into a healthier food and beverage company. It recently bought low-calorie drink maker Poppi for nearly $1.7 billion. It also acquired Siete and Sabra to help better align its portfolio with consumers’ changing tastes for more wellness-focused products. The company’s growth investments put it in a solid position to continue increasing its shareholder payout.
Rexford Industrial Realty’s dividend yield is approaching 5% following a more than 30% slump in its stock price from its 52-week high. The industrial-focused real estate investment trust (REIT) has been under pressure due to rising interest rates and slowing demand for warehouse space in Southern California.
The slowdown in Southern California drove anemic growth in the net operating income (NOI) generated by its same-property portfolio in the first quarter (0.7% increase). However, new investments (acquisitions and redevelopment projects) helped drive a nearly 7% increase in its funds from operations (FFO) per share in the period.
While Rexford is facing some near-term growth headwinds, the longer-term outlook is much brighter. The REIT estimates that a combination of annual embedded rental rate increases, in-process repositioning and redevelopment projects, and rent growth as legacy leases expire and reprice to market rates will drive a 34% increase in its NOI over the next few years. That positions Rexford to continue increasing its dividend. The REIT has grown its payout at a 16% compound annual rate over the past five years, much faster than the sector average of 3%.
W.P. Carey’s dividend yield is getting closer to 6%. The diversified REIT’s payout has risen due to its falling share price (nearly 5% decline) and steady dividend increases. It bumps up its payment a little bit each quarter.
The REIT invests in single-tenant industrial, warehouse, retail, and other properties across North America and Europe secured by long-term net leases with built-in rent escalations that raise rents at either a fixed rate or one tied to inflation. Because of that, its portfolio provides it with very stable and steadily rising rental income.
W.P. Carey routinely invests in additional income-producing net lease properties. It’s targeting to invest $1 billion to $1.5 billion into new properties this year. Those growth drivers should enable it to steadily increase its payout.
PepsiCo, Rexford Industrial Realty, and W.P. Carey fit my investment strategy. They pay high-yielding dividends that they aim to steadily increase and have strong businesses. Because of that, they can supply me with more income now and in the future, which should help me reach my early retirement goal even faster.
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Matt DiLallo has positions in PepsiCo, Rexford Industrial Realty, and W.P. Carey. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
