The BEST Dividend Stocks To Earn Passive Income in 2022
So, have you ever wished there was an easy way to make money on a consistent basis without having to lift a finger?
Well, there is, and it’s not OnlyFans. It’s of course, dividend stocks. Today, we’re going on a journey through the best dividend stocks in my portfolio which have the potential to make you rich.
Passive income is the dream for a lot of people. I mean, who won’t wanna sit back on the beach and have the money rolling in while the only worry they have is getting the perfect tan?
Now, every time I talk about passive income, I have to burst people’s bubbles and let them know that no income is truly passive. However, today is your lucky day.
Dividend stocks are one of the most passive, easy ways to make money on a consistent basis with absolutely no work. As long as you pick the right ones with long term potential like the stocks we are gonna be discussing today.
You are going to have to be dedicated. I like to think of it like this. You can either work hard for the next five to 10 years and enjoy the rest of your life or enjoy the next five to 10 years and work hard for the next 50 years.
A dividend is essentially a reward some companies give the people who hold their stock, otherwise known as their shareholders which thanks them for their ongoing support. These are often paid four times per year. Once each quarter.
People always think that investing is about finding the next big thing. But the data suggests we might be heading into rocky times and dividend stocks are the perfect solution for getting paid while a market might not be experiencing explosive growth.
A common way to rank dividend stocks is a lot like the olden days when everyone was put into a social class. At the top you have the king. In the investing world, these are stocks that have not only paid a dividend but actually increased it for 50 years in a row.
Under that you have the aristocrats. These are stocks that have increased their dividends for the last 25 years. That’s where the official definition stopped.
But I like to think of the rest as either the middle class or the peasants. These are by no means bad stocks. However, they could be less stable when it comes to dividend payouts.
Here’s an important warning for you, guys. Lots of people get drawn in by companies offering extremely high dividends, which is cool, but as much as it’s about the money you’re being paid, it’s also essential that it’s sustainable for the long term.
I mean, would you rather I gave you $10 this year and then cut you off or $5 every year for the rest of your life.
Usually, Starbucks is a bad use of your money but today it could actually make you some passive income as it’s the first dividend stock in my portfolio.
Although this isn’t the highest dividend payer in the world, I do think it’s extremely high for the quality of the stock. At 2.37%, I mean, they don’t even need to entice people to hold their shares as they are extremely popular, anyway.
I’m not surprised when they give you free refills. I know it sounds silly, but one of the things I love about Starbucks is how they always get your name wrong.
But I guess in this case, they got it dead right. It’s actually a genius marketing strategy. As everyone always shares photos of their drinks on social media, it looks like it’s working, with more than 32,000 stores across 82 countries.
And this is expected to grow to over 55,000 stores by 2030. To top this all off, Starbucks proves themselves a solid investment as they took a hit on profits in 2020 but still increased their dividends.
This proves that even during tough times, they can be counted on to deliver. This next one is a little bit different but extremely exciting.
Realty Income Corporation (REIT)
Well, maybe it’s not that exciting but it could make you some money as it has an annual dividend of 4.53%. A REIT stands for real estate investment trust.
I love this type of investment as it’s an easy way for someone with hardly any expertise to compete with the expert real estate investors. REITs own a bunch of properties and the money they receive for renting the real estate is split up and shared with investors.
And importantly, it must legally distribute at least 90% of their taxable income annually. That means you can benefit from rental income without actually owning any properties.
This one in particular owns over 11,000 commercial properties with a large amount of these being stand alone buildings. With tenants including Walmart, Dollar General, AMC Theaters, Tescos and Amazon.
They know the tenants are likely to pay a reliable and predictable income, especially with companies like Walmart being so recession proof and even thriving in hard times.
During the great recession in 2008, their tenancies only dropped by 4% and they didn’t stop increasing their dividends. This is not surprising as 94% of their rental income is resilient to economic downturns. They’ve paid 620 dividends in a row for more than 52 years.
Johnson & Johnson
Now for Johnson & Johnson, which is far bigger than you might realize and could be an opportunity that you’ve been overlooking. When I say Johnson & Johnson you are probably thinking about baby powder.
However, they are the powerhouse behind big brands like Listerine, Calpol, Tylenol, and more. The company has been on the stock market since 1944 which is before even I was born.
They offer a 2.5% dividend which has been increased for over 50 years, landing them a crown as one of the dividend kings. Johnson & Johnson started out by selling actual fit for purpose antiseptic, medical supplies.
I mean, get this, before Johnson & Johnson came along, doctors would treat someone’s injury with a sponge and then treat the next patient with the same dirty sponge.
Since then, J&J have invented the Band-Aid, entered the vaccine market and are now major players in the skin health and self care industries, running a profitable operation every single year.
This all goes to show that they are a groundbreaking company and a solid long term investment that happens to pay you a nice dividend.
JPMorgan is by far the most influential bank on the planet and also a great stock with a dividend yield of 3.1% annually.
When investing, it’s a good idea to have your money split across multiple different sectors for diversification purposes. This means that if one sector isn’t doing well, you are covered in other areas.
JPMorgan is one of the longest standing banks and actually provided the financing for the American Railroad System. As well as J.P. Morgan himself arranging the financing which prevented the nation’s monetary system from collapsing back in the 1900s.
This gives them a lot of credibility. When inflation is high, banks make more money as they’re able to charge more for loans but JPMorgan have many revenue streams outside of lending to everyday people which makes them less impacted by the state of the economy.
A lot of their money comes from trading. After all, they are the largest investment bank in the world. I wouldn’t be surprised if they’re dabbling with a bit of crypto.
Now, I was debating whether to write about Coke or Pepsi for this next one, but I eventually decided on PepsiCo as they have been aggressively expanding into the snack industry.
In fact, they own Doritos and Walkers or more commonly known as Lay’s. And these snack sales account for over 65% of the company’s profits, PepsiCo have also secured 70% of the sports drink market with Gatorade, which absolutely dominates Coca-Cola’s Powerade.
They are currently paying a dividend of 2.7% annually with this being a special time because if they increase their dividend payout this year, then they will rise to the rank of dividend king.
When investing in a dividend company, I do sometimes get worried that because they’re paying so much money out to their investors, they might reduce how much they’re reinvesting back into their business, but that just isn’t the case with Pepsi.
With $6.9 billion in cash in short term investments, they have more than enough to both pay dividends and reinvest back into things like their manufacturing capacity and productivity.
This makes me very confident holding PepsiCo stocks as I can see a lot of potential for the company long term.
Let’s talk about Unilever as this company’s actually really interesting. They’re paying investors a cool 4.56% dividend, which is pretty good if you ask me.
Now, you might be thinking what’s Unilever? I’ve never heard of them. And you know what? I wouldn’t blame you. But if I was to walk around, showcasing all the Unilever products in a store, it’d probably take me over two hours.
Unilever are the giants behind Ben & Jerry’s Ice Cream, Magnums Solero, Cornetto and that’s just the ice cream. Radox Muscle Soak, perfect for me. PotNoodle, Vaseline, and even PG Tips, if you fancy a nice English cup of tea, but you get my point.
The brands I just mentioned are only the tip of the iceberg when it comes to Unilever. I feel confident that it’s near enough impossible to leave the supermarket after a weekly shop without one of their products, especially if you’re from the UK or Europe.
Founded in 1929, it’s safe to say Unilever have been around a while. They even aired the first television advert in the UK in 1955 and also the first color TV advert in 1969.
So from ice cream and ready meals to deodorant and hair gel, Unilever have strong brands under their belt. This could help Unilever push through times of high inflation.
Vanguard High Dividend Yield ETF
If investing in all these separate stocks sounds like a bit of a headache. Then you could always just opt for this one, the Vanguard High Dividend Yield ETF.
Now, this isn’t technically a stock. Instead it’s a fund that combines 404 stocks with above average dividend yields which you can invest in with one simple click.
This actually includes JPMorgan, as well as Johnson and Johnson, which we previously mentioned. And many more.
This ETF basically makes the process of investing in dividend stocks even easier and allows you to spread your risk over many different companies.
It may not have the highest payout which is currently 3.2% annually. However, because of how this ETF works, it does mean that it will always be above the market average.
Vanguard funds are also widely trusted as they’ve been in the game for over 45 years and always have extremely low expense ratios. This is super important as it doesn’t matter how good the dividend is if they’re charging you an arm and a leg for it.
A lot of people’s goal with dividend investing is to use the free money coming in every quarter to cover their living expenses. This means anything extra they make is 100% profit.
Just be wary if you do go down the dividend route, it can make you more tempted to spend the money instead of reinvesting it, which doesn’t do much for your future.
Make sure to subscribe if you wanna grow your wealth.