My top financial goal is to become financially independent. I'll reach financial freedom once my passive income can cover my basic living expenses. That's leading me to buy stocks that pay sustainable dividends that should continue growing.
Two of my top passive income investments are Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) and Realty Income (NYSE: O). I plan to hold both for the next decade. Here's why.
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Brookfield Renewable checks all the boxes for what I seek in a core passive income stock investment:
A high current yield: At over 4.5%, it's well above the S&P 500's roughly 1% yield.
A strong dividend growth track record: Brookfield Renewable has increased its payout by at least 5% annually since 2011.
A fortress financial profile: Brookfield has stable cash flows (90% contracted for an average of 12 years), a comfortable dividend payout ratio (around 75% of its funds from operations (FFO) over the last 12 months), and a strong investment-grade balance sheet (BBB+).
Visible growth profile: It expects to grow its FFO per share by more than 10% annually through at least 2031, which should support dividend growth of 5% to 9% annually.
While Brookfield's current yield is very attractive, the company's growth potential is why I plan to hold it for the next decade. It has multiple growth drivers, including inflation-linked contractual rate increases, margin expansion as existing contracts expire and renew at higher rates, development projects, and acquisitions.
Brookfield has a large pipeline of renewable energy development projects, which should keep it busy for the next decade. For example, it's building over 10.5 gigawatts (GW) of power generation capacity for Microsoft alone between 2026 and 2030. For perspective, Brookfield's current operating capacity is around 47 GW.
The company's high-powered growth engine should enable it to generate strong total returns. With a 4.5%+ yield and a more than 10% annual earnings growth rate, Brookfield could deliver total annual returns in the mid-teens. So, it can grow my passive income and my wealth in the coming decade.
Realty Income is an ideal passive income investment because it pays a monthly dividend. The real estate investment trust (REIT) also has everything I look for in a core passive income investment:
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