You probably work hard for your money, so it should work hard on your behalf, making you more money. One way to put your money to work is by investing it in high-quality dividend stocks.
For example, investing $1,000 into the following trio of high-quality dividend stocks can generate over $50 of annual dividend income each year:
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Dividend Stock |
Investment |
Current Yield |
Annual Dividend Income |
---|---|---|---|
Federal Realty Investment Trust (NYSE: FRT) |
$333.33 |
4.66% |
$15.53 |
VICI Properties (NYSE: VICI) |
$333.33 |
5.29% |
$17.63 |
W.P. Carey (NYSE: WPC) |
$333.33 |
5.71% |
$19.03 |
Total |
$1,000.00 |
5.22% |
$52.20 |
Data source: Google Finance.
Here's a look at what makes this high-yielding trio a safe bet for passive income.
Federal Realty Investment Trust is a real estate investment trust (REIT) focused on owning high-quality shopping centers and other mixed-use properties. The landlord focuses on quality over quantity.
Despite being in business for 60 years, Federal Realty only owns about 100 properties in a half-dozen markets (for comparison, the leading shopping center REIT owns over 565 properties across the country). However, these are some of the top shopping centers in the first-ring suburban locations of the country's largest cities. Those locations have strong demographics, with dense populations of high-income households, making them very appealing to retailers.
The REIT routinely invests money to upgrade its portfolio. It will spend capital to upgrade existing properties to make them more attractive to high-quality retailers. The REIT will also build residential units or other property types (e.g., offices or hotels) adjacent to its shopping centers to enhance traffic to its retail tenants. Federal Realty will also buy high-quality shopping centers when they go up for sale, often selling lower-quality existing properties to finance those acquisitions.
The company's strategy has been highly effective. It has increased its dividend for 57 straight years, the longest streak in the REIT sector.
VICI is also a REIT. It focuses on owning experiential properties, like casinos, bowling entertainment centers, and sports complexes. It leases these properties back to operating tenants under very long-term triple net (NNN) leases (41-year weighted average term remaining). NNN leases produce very stable rental income because tenants cover all operating costs, including routine maintenance, real estate taxes, and building insurance.
Those leases increasingly escalate rents at rates tied to inflation (42% of its leases this year, rising to 90% in 2035). Meanwhile, VICI Properties routinely invests money to grow its portfolio. It will buy experiential properties in sale-leaseback transactions. The REIT will also originate real estate-backed loans to fund experiential property developments.
These growth drivers have enabled VICI Properties to increase its dividend every year since its formation (seven straight years).
W.P. Carey is a diversified REIT. It owns operationally critical single-tenant industrial, warehouse, retail, and other properties across North America and Europe. It primarily owns properties secured by long-term net leases that feature built-in rent escalations (51% link rents to inflation, 46% feature annual fixed-rate increases, and the remaining have other growth features or don't increase rents).
The REIT typically invests more than $1 billion each year into additional income-generating properties with built-in rent growth. It will buy properties in sale-leaseback transactions, acquire portfolios of net lease properties from other investors, and invest in build-to-suit development projects. Those growth drivers enable W.P. Carey to steadily increase its dividend. The landlord typically gives its investors a small raise each quarter.
Federal Realty, VICI Properties, and W.P. Carey generate very stable income from long-term leases. That enables them to pay safe dividends and invest in growing their portfolios. That makes them great investments for generating reliable passive income.
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Matt DiLallo has positions in Vici Properties and W.P. Carey. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.