Some companies really treat their investors well. They pay lucrative dividends that they routinely raise. That makes them excellent stocks to buy and hold for passive income.
Several high-yielding dividend stocks recently raised their payouts again. That list includes PepsiCo (PEP -0.53%), Chevron (CVX 0.47%), and Rexford Industrial Realty (REXR -2.52%). With more dividend growth likely, this trio are great stocks to buy and hold for a steadily rising stream of passive income.
Satisfying investors’ thirst for dividend income
PepsiCo currently offers a dividend yield of around 3.8%. That’s more than three times higher than the S&P 500‘s dividend yield (around 1.2%).
The beverage and snacking giant recently announced its latest annual dividend increase. The company intends to increase its dividend by 5%, starting with the June payment. That represents its 53rd consecutive annual dividend increase, keeping PepsiCo in the elite group of Dividend Kings (companies with 50 or more years of annual dividend growth).
PepsiCo can easily afford its high-yielding and steadily growing dividend. The company produced $12.5 billion in net cash last year, easily covering its $7.2 billion dividend outlay. PepsiCo also repurchased $1 billion of its shares. The company ended the year with a cash-rich balance sheet with over $9 billion of cash and short-term investments. With more growth ahead (it expects to deliver mid-single-digit earnings-per-share growth in 2025), PepsiCo is in a strong position to continue paying a growing dividend.
A well-oiled dividend-paying machine
Chevron recently announced a 5% dividend increase for 2025. That marks the oil giant’s 38th consecutive year with an annual dividend increase. It has grown its payout at a faster pace than the S&P 500 has over the past five years. That pace is nearly double the rate of its nearest peer in the oil patch. With its latest raise, Chevron’s dividend yields 4.2%.
The oil giant is in an excellent position to continue increasing its dividend. It produced $15 billion in free cash flow last year, easily covering its $11.8 billion dividend outlay. Chevron returned a record $27 billion in cash to shareholders last year via dividends and share repurchases by utilizing its strong balance sheet. It ended the year with a net debt ratio of around 10%, well below its 20% to 25% target range.
Chevron expects to produce an even bigger free cash flow gusher in the future. It foresees adding $10 billion to its annual free cash flow by 2026, fueled by projects to grow its high-margin production and cost savings initiatives. That number doesn’t include its pending acquisition of Hess, which would significantly enhance and extend its free cash flow growth outlook. It should give the oil giant plenty of fuel to continue increasing its payout.
Lots of built-in growth
Rexford Industrial Realty recently revealed that it’s raising its dividend by another 3%. That pay bump pushed the industrial real estate investment trust’s (REIT’s) dividend yield up to around 4.1%.
On the one hand, Rexford’s recent raise is a bit light compared to its historical growth rate. The REIT has grown its payout at a 15% compound annual rate since its initial public offering in 2013. It could certainly have supported a higher dividend increase, given its strong financial profile and the earnings growth it delivered last year (6.8% increase in its core funds from operations (FFO) per share).
Instead, the REIT opted to launch a $300 million share repurchase program to capitalize on the nearly 30% decline in its share price since the start of last year. The company’s stock has slumped due to higher interest rates and slowing demand growth in the Southern California logistics market, its sole focus area.
Rexford Industrial has significant built-in growth that should help offset the near-term headwinds of the Southern California warehouse market. The company expects its net operating income to grow by more than 30% over the next three years, driven by repositioning and redevelopment projects and rental increases (embedded in its existing leases and capturing much higher market rates as legacy leases expire).
On top of that, the REIT has a strong balance sheet, giving it ample financial flexibility to make accretive acquisitions as opportunities arise. The REIT’s built-in growth and additional upside from acquisitions and improving market conditions position it to continue increasing its dividend in the future.
High-quality, high-yielding dividend stocks
PepsiCo, Chevron, and Rexford Industrial Realty continue to grow their high-yielding dividends. They’re all in strong positions to keep pushing their payouts higher in the future. Because of that, they’re excellent dividend stocks for those seeking lucrative and growing income streams to buy.
Matt DiLallo has positions in Chevron, PepsiCo, and Rexford Industrial Realty. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends Rexford Industrial Realty. The Motley Fool has a disclosure policy.