Passive income can mean different things to different people, including the folks at the IRS, which has a whole set of rules about income derived from businesses in which you don’t materially participate. That includes, for instance, leasing equipment or participating in real estate partnerships in which you have no active management role.
For our purposes here, we’ll consider passive income to be that income you get from investing in assets that generate cash flow simply because you put money into them. The stock market is a great place to do just that, and there’s no shortage of dividend-paying stocks to choose from.
Let’s look at three promising real estate investment trusts (REITs). REITs hold portfolios of income-producing properties and are required to pay out at least 90% of their taxable income to shareholders. That alone makes them good considerations for income stocks.
According to Nareit, REITs have outpaced inflation in all but two of the past 20 years. According to an article on the trade group’s website:
REITs provide natural protection against inflation. Real estate rents and values tend to increase when prices do. This supports REIT dividend growth and provides a reliable stream of income even during inflationary periods.
Below are three to consider, each a prominent player in its specific real estate investing segment.
1. Camden Property Trust
Camden Property Trust ( CPT -0.26% ) is a Houston-based builder, owner, and manager of 170 apartment communities across the United States, with five more currently under development. With a market cap of about $17.5 billion, the company just joined the S&P 500. It is benefiting from the intense demand for apartments that allowed Camden to raise its rents by about 15% in the past year.
Camden has raised its dividend by more than 25% in the past five years and is currently yielding about 2.27% after declaring a payout of $0.94 per share for the…
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