If you’re looking to secure a stream of passive income to support your retirement dreams, there’s more than one way to make it happen. Buying rental properties is an easy-to-understand option that you’re probably already familiar with. Unfortunately, owning rental properties comes with day-to-day responsibilities that most retirees should avoid.
If you really want to build a passive income stream, you may be much better off buying dividend-paying stocks and holding them for the long term. Pfizer (NYSE: PFE ), PennantPark Floating Rate Capital (NYSE: PFLT )And Ares Capital (NASDAQ: ARCC ) Offers an ultra-high yield that averages 8.8% at recent prices. With this high average yield, an equal spread of $11,400 invested in them is enough to set you up with $1,000 in annual dividend income.
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If income-seeking investors can count on one thing, it’s that demand for prescription drugs continues to grow. As one of the world’s largest drugmakers, Pfizer has already increased its dividend payout for 15 consecutive years. At recent prices, it offers a 6.7% yield.
Pfizer’s share price fell in 2023 in response to sharply declining sales of Covid-19 products. It remains depressed because some of its biggest revenue streams, such as the oral blood thinner Elixir, can lose patent-protected feature over the next few years.
Looming patent cliffs will stifle Pfizer’s dividend payout growth over the coming decade. With so many new revenue streams coming online, however, they probably won’t stop the company from raising its payout for another 15 years.
Pfizer made many investments with the success of its Covid-19 vaccine, and many are paying off. In the first nine months of 2024, sales of its Covid-19 vaccine fell 66% to $2.0 billion. Despite the loss, total revenue rose 3% year-on-year.
The FDA approved nine new drugs from Pfizer’s product development pipeline in 2023. In the US, where those new drugs are already in development, sales of the products through the first nine months of 2024 are up 27% year over year.
PennantPark Floating Rate Capital is a business development company (BDC), which means it lends to mid-sized businesses. American banks have been less inclined to lend directly to businesses for decades.
Mid-sized businesses are hungry for capital loans at rates that might surprise you. The average yield on debt investments in this BDC’s portfolio was 11.5% at the end of September.
