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I'm on a journey toward financial independence. A key aspect of my strategy is to grow my passive income streams. I'm working toward generating enough income to offset my recurring expenses.
I still have a long way to go, but I'm making steady progress. I'm doing that by investing in high-quality dividend stocks, focusing on those with higher-yielding payouts that steadily rise. I recently bought a few more shares of Chevron (NYSE: CVX), Realty Income (NYSE: O), and Verizon (NYSE: VZ). Here's why I believe they will help me on my journey toward financial freedom.
Plenty of fuel to grow its payout
Chevron is an elite dividend stock. The oil giant has increased its payout for 37 straight years. It has grown its dividend faster than the S&P 500 over the last five years and at more than double the rate of its closest peer. Its most recent boost was a solid 8%.
I firmly believe Chevron can continue growing its attractive dividend (it currently yields 4.2%). In recent years, the company has sharpened its investment focus on its highest-return opportunities. That bolsters its view that it can increase its free cash flow per share by more than 10% annually through 2027. This forecast assumes that oil will average around $60 per barrel. It would give the oil giant the cash to continue investing in high-return expansion projects, increasing its dividend, and repurchasing shares at the low end of its $10 billion-$20 billion target range.
Chevron could grow its free cash flow even faster at higher prices (crude is currently over $80 a barrel). Meanwhile, it has agreed to buy rival Hess in a roughly $60 billion deal. That acquisition would enhance and extend its growth outlook into the 2030s. Chevron believes it could double its free cash flow by 2027 at $70 oil if it closes its Hess acquisition. Given these factors, Chevron should have more than enough fuel to continue paying and raising its high-yielding dividend.
As consistent as it gets
Realty Income has lived up to its name over the years. The real estate investment trust (REIT) has supplied its investors with durable dividend income. It pays a monthly dividend, which it has increased 124 times since its public-market listing in 1994, including the last 106 consecutive quarters. It has boosted that payout at a 4.3% annual rate.
The REIT should have no problem continuing to increase its high-yielding payout (currently 6%). It aims to grow its adjusted funds from operations (FFO) per share by 4% to 5% annually. Acquisitions are the main expansion driver. Realty Income invests billions of dollars each year to acquire and develop additional income-producing real estate. The company has lots of financial flexibility to fund new deals thanks to its conservative dividend payout ratio (roughly 75% of its adjusted FFO) and elite balance sheet.