Want Decades of Passive Income? 3 Stocks to Buy Right Now
A consistent stream of passive income is likely what you'll be looking for if you are retired. But you'll want to make sure that the dividends you're collecting are going to keep going for decades, which is exactly why you should take a look at T. Rowe Price (NASDAQ: TROW), Bank of Nova Scotia (NYSE: BNS), and Agree Realty (NYSE: ADC) right now.
Annuity-like income at T. Rowe Price
Most investors will probably be familiar with the name T. Rowe Price given that the company operates one of the largest mutual fund families on Wall Street. It also offers other financial services. But the real key is that customers don't like to move from one asset manager to another, which makes the assets under management (AUM) at T. Rowe Price fairly sticky.
The company charges management fees for its services, so its business is kind of annuity-like in nature. That helps explain why T. Rowe Price has been able to increase its dividend annually for an impressive 38 consecutive years. The yield today is an attractive 4.2%.
There are a couple of negatives, however. First, the mutual fund business is facing increasing competition from exchange-traded funds (ETFs). T. Rowe Price is dealing with this by broadening its product offerings to include ETFs and alternative assets, an in-demand investment area. With no debt on its balance sheet, the company should be able to adjust to changing industry dynamics in relative stride.
The second issue is more fundamental to the business. AUM varies with the broader market, so T. Rowe Price's income can be volatile. But given the dividend history, management is clearly used to this phenomenon. All told, the risk/reward balance seems tilted in favor of long-term dividend investors today.
Bank of Nova Scotia has paid a dividend since 1833
If you are looking for a company that can pay you dividends for decades into the future, it seems logical to consider one that has already paid investors for nearly 200 years. Bank of Nova Scotia, or Scotiabank, has done just that, having paid dividends continuously since 1833. The bank's dividend yield today is 6.4%. That's an extremely high yield for a bank.
There are two things going on here. First, unlike most of its Canadian banking peers, which have looked to expand into the U.S. market, Scotiabank has focused on making inroads into South America. That's an inherently risky choice given that there are many emerging market economies in the region. But it also hasn't worked out quite as well as planned, with Scotiabank lagging peers on key metrics like earnings growth and return on equity.
This brings up the second point: Management is working to fix that by focusing on stronger markets (Mexico) and exiting weaker ones (Columbia). There's no quick remedy here and the payout ratio is likely to remain above management's target for a few years, but the company has stated it is OK with that fact.
If you can stomach collecting a big yield while you wait for the turnaround to take shape, this long-term dividend payer is worth a closer look.
Agree Realty stumbled, but got back up again
When Agree Realty was a relatively small real estate investment trust (REIT), it stumbled badly and had to cut its dividend. But that happened as the U.S. economy was coming out of the Great Recession. Today, Agree Realty is a much larger and stronger company. In fact, its dividend track record is now filled with regular increases. And those dividends have been paid monthly since 2021, making the stock something of a paycheck replacement.
The dividend has grown nearly 70% over the past decade, and the yield today is roughly 4.9%. That's actually low relative to some of this REIT's net-lease peers (net leases require tenants to pay most property-level operating costs). Put simply, Agree's dividend is rising fairly rapidly and investors are willing to pay up for that. If you are looking for a dividend-growth-oriented, high-yield stock, Agree Realty looks like it has learned from past mistakes and is now a reliable business that could pay you for decades to come.
Strong dividends from strong companies
One thing that T. Rowe Price, Scotiabank, and Agree Realty have in common is that they appear to be well-positioned to keep paying investors because of their fundamentally strong businesses. They all have their negatives, like any stock investment, but when you weigh the yield and dividend history against the risks, the balance seems to be tilted in favor of long-term, income-focused investors.
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Reuben Gregg Brewer has positions in Bank Of Nova Scotia. The Motley Fool recommends Bank Of Nova Scotia and T. Rowe Price Group. The Motley Fool has a disclosure policy.
