I think I have an addiction to buying dividend stocks. I love collecting the passive income they provide, which I often reinvest into buying additional dividend-paying stocks. As my passive income grows, I become more financially independent.
I recently bought even more shares of PepsiCo (NASDAQ: PEP), Main Street Capital (NYSE: MAIN), and Verizon (NYSE: VZ). Here’s why I can’t stop buying these high-quality, high-yielding dividend stocks.
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PepsiCo likely needs no introduction. The global snacking and beverage company’s portfolio includes iconic brands such as Pepsi, Gatorade, and Doritos. These brands generate durable cash flow to cover the company’s 3.8%-yielding dividend, which is three times higher than the S&P 500‘s yield of 1.1%.
The company has a remarkable record of increasing its dividend. It raised its payment by another 5% last year, extending its growth streak to 53 consecutive years. That qualifies PepsiCo as a Dividend King as a company with 50 or more years of annual dividend increases.
PepsiCo’s long-term target is to deliver 4% to 6% annual organic revenue growth and high-single-digit earnings per share growth. The company aims to enhance its growth rate through strategic investments. It bought Poppi for $1.7 billion last year and strengthened its long-term strategic partnership with Celsius, which included increasing its stake to 11%. These growth drivers should enable the company to continue increasing its dividend payment.
Main Street Capital is a business development company (BDC). It provides debt and equity capital to lower middle market companies ($10 million to $150 million in annual revenue). It also makes secured debt investments in middle market companies ($25 million to $500 million in revenue) owned by private equity funds. These investments generate interest and dividend income to support the company’s dividend payments.
The BDC has a unique dividend policy. It pays a monthly dividend set at a level it can easily sustain. Main Street Capital has never reduced or suspended its monthly dividend. Instead, it has steadily raised its payment, including by 4% over the past year and by 136% since its IPO in 2007. This payment currently yields 4.8% based on the company’s recent share price.
Additionally, Main Street Capital periodically pays a supplemental quarterly dividend. It has paid the same quarterly rate for the past couple of years. When added to its monthly dividend, the BDC has a 6.7% dividend yield based on its annualized payout and share price. With two passive income streams, Main Street Capital is an ideal investment for my strategy.
