There are plenty of ways to go about generating a passive income for life. But my preferred method is through the stock market. By investing capital into solid businesses with bright futures, the income from dividends can become rather substantial over the long term.
With that said, what are some of the best income stocks for my portfolio today? Let’s explore my favourites.
Becoming a renewable energy baron
When investing in dividend stocks, I’m drawn to the companies I believe will remain relevant for at least the next 10 years. And I think it’s fair to say that electricity will still be in demand a decade from now.
Most of the electrical grid is powered by gas turbines in the UK. Yet renewables are starting to become a more significant contributor. And that makes Greencoat UK Wind (LSE:UKW) rather promising, in my opinion. This business owns a vast network of on- and off-shore wind farms generating clean electricity.
It’s not a risk-free investment, of course. Being a real estate investment trust, most of the profits are returned to shareholders generating a 4.7% yield today. But that means there’s little capital left for reinvestment and, consequently, management has loaded up on debt over the years. With interest rates rising, profit margins will undoubtedly get squeezed, potentially compromising the passive income stream.
Having said that, net profit margins currently stand at a massive 86%. Therefore, I think Greencoat can absorb this increased pressure without much trouble. And that’s why it’s number one on my list today.
Generating passive income from e-commerce
The rise in popularity of online shopping continues to trend upward, even with the pandemic no longer keeping brick & mortar stores shut. But e-commerce is creating a big problem regarding logistics that Warehouse REIT (LSE:WHR) is trying to solve.
The business owns and leases a network of warehouses across the UK, predominantly to large online retailers like Amazon. With demand for well-positioned facilities on the rise and the supply quickly running out, Warehouse REIT has consistently increased rent, boosting dividends to a 4% yield today.
It’s far from the only player in the space. And the rising level of competition is making the acquisition of new prime locations more challenging. However, with an occupancy rate of 93.5% and average lease duration steadily rising over time, I think Warehouse REIT could be a fine addition to my passive income portfolio.
Digging for 21st-century metals
As the world slowly transitions to eliminate carbon, technologies like renewable energy and electric vehicles (EVs) are rapidly being adopted. But it’s creating a supply problem for battery metals such as cobalt, copper, and vanadium. This has proven to be quite advantageous for Anglo Pacific Group (LSE:APF). The mining royalties business has an equity interest in 15 sites worldwide, eight of which are actively producing.
Commodities are indeed notoriously cyclical. And that’s a pattern which is unlikely to change anytime soon. As such, the bottom line has been wobbly over the years, leading to an equally wobbly dividend.
However, despite this risk, I don’t see demand for battery metals disappearing anytime soon, especially now that more EV manufacturers are entering the picture. Hence why this stock is on my passive income investment list today.