Building a successful passive income can change your life. That means breaking the link between the time you work and the income you receive. In my view, dividend stocks are one of the best ways to generate passive income. But it’s not always easy.
Achieving credible passive income means finding a business that can generate steady growth over the years while generating enough cash for dividends. Not all popular dividend stocks fit this description.For example, big FTSE 100 Miners are currently paying large dividends, but all cut their payments significantly five years before commodity prices plummeted.
The three companies we look at today are all the stocks I own in my portfolio. All three have a long history of dividend growth When A strong financial indicator. I think they are one of the best passive income ideas on the market today.
I raised this 6.6% yield
Recently added Legal & General Group (LSE: LGEN) Share to my ISA portfolio. In my view, this FTSE 100 financial giant is one of the safest high-yielding stocks on the market.
Legal & General’s business model involves investing large amounts of cash in long-term assets such as stocks, renewable energy assets, commercial real estate and rental housing. As of the end of June, L & G’s assets under management were £ 1.3 trillion.
Revenues from these businesses will be used to support the Group’s life insurance and annuity businesses. Large slices of surplus cash are returned to shareholders each year, and dividends have doubled since 2013.
In fact, with the exception of the reductions during the 2008 financial crisis, Legal & General dividends have continued to increase for over 30 years.
Of course, just because dividends have a long history does not mean that dividends will continue to increase. However, I think it is strong evidence that this business is operated with a focus on cash generation and shareholder returns. I think it’s a good start for passive income stocks.
Quality passive income
There are other insurance companies with attractive dividend yields. So why did you choose Legal & General?
After years of tracking this business and other similar stocks, we have found that L & G’s business model is consistently more profitable than its UK rivals: Aviva.. I also like the clear and focused financial reporting of Legal & General. This highlights important information for me, such as cash generation and return on equity.
The main risk I can see is that at some point profits can be lower than expected, as Legal & General’s operations can be so large, complex and difficult to manage. It can take years to correct this situation, during which shareholders may lose dividends (and stocks).
Personally, I am willing to accept this risk. Legal & General stocks are currently trading at eight times the expected return and have a dividend yield of 6.6%. I’ve bought at this level and I think this passive income stock looks too cheap.
We are all customers
Find a household with nothing in the UK, or most other countries Unilever (LSE: ULVR) The products in it. I know there are some in my house. I’m pretty sure you’ll probably do that too.
As consumers, many of us are very loyal to our favorite brands, especially when buying frequently and at low cost. The beauty of Unilever’s portfolio of branded consumer products is the regular and repetitive purchases.
People who like Persil Detergent powder, Ben & Jerry’s Ice cream, or Hermanns Mayonnaise probably doesn’t consider many options. Unilever has 400 brands in 190 countries and its products are used daily by 2.5 billion people. That’s the beauty of the group’s business model — the interaction of billions of small, regular brands.
The challenge for this group is to address changing consumer preferences and more difficult issues such as sustainability. For example, as a heavy user of palm oil and plastic, Unilever has not gone beyond criticism.
Another risk is that the popularity of cheap, self-branded products in supermarkets will gradually undermine Unilever’s benefits. We all know that some of these own branded items are as good as branded alternatives.
So far, Unilever has been successful in staying ahead of the game.The history of the group goes back 150 years And that dividend hasn’t been reduced for more than 50 years. The stock dividend yield is fairly average at 3.7%, but Unilever’s consistently high rate of return and steady growth mean that this is one of the safest dividends on the FTSE 100.
Passive income stocks that are overlooked
Virtually all modern products and services must be certified in some way. They have to do certain things and not others. Even if they are misused, they must be safe. And they must always be the same, but many are generated.
Who checks all of this and ensures that it is done? One of the leading players in the quality assurance and certification sector is the FTSE 100 company. Intertek Group (LSE: ITRK).. Intertek provides warranty, testing, inspection and certification services to industries such as aviation, chemicals, consumer goods, food and transportation.
The group’s history dates back 130 years, but it was born in its current form in 2000 when it joined the FTSE 250. At that time, the stock was trading at £ 4. Today, they change hands for over £ 50.
Intertek’s dividends are on a similar uptrend. Payment began in 2003 at 8.1p per share. Dividends have never been reduced, and today they are 106p per share.
Intertek is not as famous as the other two companies I saw today. But I think it’s checking every box of high quality passive income stocks.
What could go wrong? One risk is that the main risk is that Intertek can lag behind its rivals in delivering new services and slow growth. The second concern is that the group may start overpaying for acquisitions, reducing future earnings.
So far, Intertek has avoided these issues. The Group’s operating margin has been healthy at an average of 15% in recent years. Profit is expected to recover in 2021 after last year’s challenge.
Intertech stocks trade at 28x expected returns and offer a modest dividend yield of 2%, which I think is a good passive income stock. I recently bought stocks and will hold them for years.
Markets around the world are involved in a coronavirus pandemic …
And with so many great companies trading at prices that look like “discount bin” prices, it may now be time for knowledgeable investors to get some potential bargains. Hmm.
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3 Passive Income Stocks to Buy Now
https://www.fool.co.uk/investing/2021/09/10/3-passive-income-stocks-to-buy-now/ 3 Passive Income Stocks to Buy Now