3 Elite High-Yield Dividend Stocks That Could Supply You With a Lifetime of Rising Passive Income

Buying high-quality dividend stocks is a great way to collect passive dividend income. The best ones increase their dividends each year, and they can help you more than offset the impact of inflation over the long run.

Federal Realty Investment Trust (NYSE: FRT), NNN REIT (NYSE: NNN), and Essex Property Trust (NYSE: ESS) have elite records of growing their dividends. The real estate investment trusts (REITs) have all delivered 30 or more years of consecutive annual dividend growth and should be able to continue increasing their higher-yielding payouts in the decades ahead, making them great stocks to buy for dividend income that could steadily rise throughout your lifetime.

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Dividend royalty

Federal Realty Investment Trust last raised its dividend in August 2024, extending its record to 57 consecutive years of dividend increases. That's the longest streak in the REIT sector and qualifies Federal Realty as a Dividend King, a company with 50 or more years of annual dividend increases. The retail REIT currently has a dividend yield of 4.5%, well above the S&P 500's 1.3% yield.

A big driver of Federal Realty's ability to consistently increase its dividend is its focus on quality over quantity. The company owns 102 open-air shopping centers and mixed-use properties with 27 million square feet of commercial space and 3,100 residential units, a much smaller portfolio than the sector leader. It strategically focuses on owning properties in the first-ring suburbs of major metro areas because they have the highest density of highly affluent consumers.

Federal Realty routinely invests money to upgrade its portfolio. It will complete redevelopment projects at existing properties to attract higher-quality tenants or add residential units. It will also sell lower-quality properties and recycle that capital into even better ones. This focus on quality has enabled Federal Realty to generate more durable rental income that has steadily grown despite the headwinds facing many retailers over the years.

Hitting another dividend milestone

NNN REIT delivered its 35th consecutive annual dividend increase last year. Only two other REITs and less than 80 publicly traded companies have reached that milestone. The REIT's dividend yields 5.5%.

NNN REIT also focuses on owning retail properties. However, it owns a different type of property: single-tenant net lease buildings. Net leases supply stable rental income because the tenant covers all of a property's operating expenses, including routine maintenance, real estate taxes, and building insurance. And stable rental income means a stable base of income to pay dividends.

The company has a relatively low dividend payout ratio for a REIT, at less than 70% of its core funds from operations this year. That enables it to retain meaningful free cash flow to fund new income-generating retail property investments, to the tune of about $200 million this year. It typically acquires properties from existing retail tenants in sale-leaseback transactions. That strategy provides those retailers with capital to continue expanding their footprints, which creates future acquisition opportunities for NNN REIT.

Focused on the West Coast

Essex Properties Trust recently increased its dividend, extending its streak to 31 straight years. The residential REIT has raised its payout by a cumulative 516% since its initial public offering in 1994. The landlord's dividend payment currently yields 3.4%.

The company focuses on owning apartment communities in coastal markets along the West Coast. These markets benefit from strong and growing demand for rental housing. Meanwhile, the long and complex entitlement process to build new homes tends to constrain supplies. These factors keep occupancy levels high and drive above-average rental growth rates.

Essex Properties enhances its growth rate by acquiring new apartment communities and funding development projects. It will also invest in structured financings such as preferred equity and mortgage debt secured by multifamily communities in its core markets to generate additional income. These investments add to its growing rental income, enabling it to continue raising the dividend.

Durable dividend growth stocks

Federal Realty, Essex Property, and NNN REIT have increased their dividends each year for more than three decades. Their focus on a specific property type or market is a key contributor to their success, and their expertise and conservative approach have enabled them to continue growing through a variety of market conditions. As long as they don't deviate from their winning strategies, these REITs should be able to continue supplying investors with a growing stream of passive income in the decades ahead.

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Matt 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.