4 Ultra-Safe Passive Income Vehicles to Buy and Hold Forever

4 Ultra-Safe Passive Income Vehicles to Buy and Hold Forever

One way to achieve financial freedom is to create passive income, or income that does not depend on your active involvement beyond a certain point. Passive income can help you earn money while you are sleeping or enjoying your hobbies.

Dividend stocks are one of the easiest and most popular ways to achieve this financial goal. These stocks pay you money or stock just for holding them. Moreover, dividend stocks also have the potential to increase in value over time.

There is a catch, however. Dividend stocks can decline in value due to either marketwide forces or company-level setbacks. As a result, it is vital to choose income equities backed by companies with a wide economic moat, top-tier management teams, and business models capable of successfully navigating any type of economic cycle.

Chalkboard with passive income written on it.
Image Source: Getty Images.

The following four stocks tick all of these all-important boxes, making them some of the best dividend payers in the market today.

4 Dividend stocks you can depend on for passive income

1. BlackRock (NYSE: BLK) is the world’s largest asset manager, with over $10 trillion in assets under management at the time of writing. The company offers a wide range of investment products and services, including mutual funds, exchange-traded fund, index funds, alternative investments, and advisory solutions. BlackRock benefits from its scale, diversification, and reputation as a trusted partner for institutional and retail investors alike.

The investment company has increased the size of its dividend checks by 9% on average for the past five years, which is among the fastest growth rates in the large cap space. And its current yield of 2.57% is also well above average for its peer group.

Most importantly, though, BlackRock has a long history of generating strong free cash flows, putting its stellar dividend program on solid financial ground. And with a formidable competitive advantage over the field across several key markets, the investment firm’s dividend screens as an exceptionally safe source of passive income.

BLK Free Cash Flow Chart
BLK Free Cash Flow Chart

2. Lockheed Martin (NYSE: LMT) is America’s largest defense contractor, with a dominant position in aerospace, missiles, and space systems. The company has a sizable backlog of orders from the U.S. government and foreign allies, which provides long-term visibility for its future revenues and earnings.

Lockheed Martin has raised its dividend at a compound annual growth rate (CAGR) of 7.4% over the prior five years. The defense contractor also pays a generous yield of 2.97%, and it has ample free cash flow to fund its top-shelf dividend program. Lastly, Lockheed Martin’s core business is essentially recession-proof, making it a great hedge against market volatility and geopolitical instability.

3. Medtronic (NYSE: MDT) is the world’s largest pure-play medical device company. The company’s portfolio houses a variety of products for both chronic diseases and acute ailments. In fact, Medtronic’s products are some of the biggest market share leaders in the areas of cardiac care, diabetes, neurological conditions, and minimally invasive surgery. Equally as important, the company is known for its heavy investment in research and development, keeping it one step ahead of many of its competitors.

Medtronic is a highly prized dividend stock because of its 46-year streak of raising the cash payout. Moreover, the medical device titan offers shareholders a healthy 3.27% yield, which is backed up by its stellar free cash flow and rock-solid balance sheet. Medtronic’s five-year dividend CAGR of about 5% isn’t as red-hot as BlackRock and Lockheed Martin’s, but it is on the high side for a large-cap medical device company.

MDT Free Cash Flow Chart
MDT Free Cash Flow Chart

4. Walmart (NYSE: WMT) is the leading big-box retailer in the U.S. and the epitome of one-stop-shopping.

Walmart’s sizable competitive advantage stems from its massive scale, efficiency, and state-of-the-art distribution network. On the dividend side, the company has been increasing its cash payouts every year since the mid-1970s, making it one of the most reliable passive income plays in the market.

Although its yield of 1.34% is below average and its five-year dividend CAGR of 1.46% isn’t spectacular, Walmart already generates enormous free cash flow, and it’s expected to keep doing so for a long time to come, thanks to its investments in e-commerce, supply chain automation, and fresh food items.

Should you invest $1,000 in BlackRock right now?

Before you buy stock in BlackRock, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and BlackRock wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

See the 10 stocks

*Stock Advisor returns as of February 12, 2024

George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool recommends Lockheed Martin and Medtronic. The Motley Fool has a disclosure policy.

4 Ultra-Safe Passive Income Vehicles to Buy and Hold Forever was originally published by The Motley Fool