Discover some of our contractors’ top picks for generating substantial passive income through investments below!
Alexandria Real Estate
What it does: The company specialises in creating, acquiring, and managing life science campuses in key innovation hubs.
By Oliver Rodzianko. Alexandria Real Estate (NYSE:ARE) is my favourite passive income investment at the moment. It’s renowned for long-term price growth as well as its juicy 4.5% dividend yield.
Also, it’s currently down nearly 50% from its all-time high, so it doubles up as a dividend and a value investment.
The business has stable tenants in leading biotech, pharmaceutical, and technology companies. This provides stable and long-term lease agreements. The life sciences sector is positioned for continued growth amid technology innovation. Therefore, I’m very bullish on it.
That being said, the concentrated focus on the life sciences and technology sectors makes the company susceptible to downturns in these industries. So, it’s wise for me to not rely solely on Alexandria Real Estate for my dividend income.
I bought the shares earlier in the year, and I’ll be adding to my position regularly as long as the valuation remains appealing.
Oliver Rodzianko owns shares in Alexandria Real Estate
HSBC
What it does: HSBC is a global bank operating in over 60 countries, with a special focus on Asia. Across the globe, it serves over 40m customers.
By Charlie Keough. One of my favourite shares for passive income is HSBC (LSE: HSBA). The stock sports a thumping 7.5% yield. That has been steadily rising in the last couple of years.
That includes a 90% increase last year when its payout rose from 31 cents per share to 61 cents. Alongside that, it completed $7bn worth of share buybacks.
HSBC recently offloaded its Canadian unit. With the proceeds raised, the firm plans to pay shareholders a special one-off 21 cents dividend this year. That takes its yield closer to 10%, making it one of the highest on the FTSE 100.
I do have one main concern with HSBC. It’s heavily invested in Asia and this has caused the bank issues lately. The Chinese economy isn’t firing on all cylinders. It has struggled for growth. As such, HSBC has been directly impacted.
But in the long run, I expect its focus on the region to pay dividends (quite literally!). I hope to add to my position in HSBC soon.
Charlie Keough owns shares in HSBC.
MONY Group
What it does: MONY Group operates savings platform Moneysupermarket.com and cashback site Quidco
By Paul Summers. My investment in Moneysupermarket.com owner MONY (LSE: MONY) a few years ago is still to generate a profit. However, I’ve been more than happy to stay invested for the passive income the company churns out.
This stock yields currently yields 5.7%. That’s far more than I’d get from owning a fund that simply tracked the FTSE 250. But it’s not so high that I’m doubting whether the money will eventually hit my account.
To be sure, the mid-cap operates in a hyper-competitive space. There’s a question mark over how much it can grow from here as well. However, a rise in energy switching as deals get more competitive should help.
Although it may mean losing that lovely income stream, I also wouldn’t be surprised if MONY was subject to a takeover bid or two in the near future.
Paul Summers owns shares in MONY Group
Realty Income
What it does: Realty Income owns and leases a portfolio of real estate assets, primarily focused on retail properties.
By Stephen Wright. I’ve owned shares in Realty Income (NYSE:O) for some time now. And I don’t anticipate selling them any time soon.
The company is a real estate investment trust (REIT) that leases retail properties to its tenants. The majority of its business comes from the US.
Operating on a triple net lease basis helps reduce the overall costs – and risk – for the firm. It means tenants pay for things like insurance, taxes, and maintenance.
A couple of its largest tenants – the likes of Walgreens Boots Alliance – have found themselves in trouble lately. And that increases the risk of unpaid rent.
Realty Income has a highly diversified portfolio, though. As a result, the overall impact of any individual tenant getting into difficulties is limited.
For the foreseeable future, I’m looking to keep collecting dividends from the company. It’s been remarkably stable in the past and I think the outlook is decent from here.
Stephen Wright owns shares in Realty Income.
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The Motley Fool UK has recommended Alexandria Real Estate Equities, HSBC Holdings, and Mony Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
