Certainly, some people are willing to swap out growth stocks regularly in an effort to maximize their net long-term gains. As most investors age, however, their needs and interests evolve. They eventually need more income and less growth. They also want to spend less time monitoring and managing a portfolio.
If the latter increasingly sounds like you, here's a closer look at three of your best bets to get you started on decades' worth of reliable passive income. Note that each underlying business is built to last.
1. Bank of America
You know the company. Bank of America(NYSE: BAC) is, of course, one of the nation's biggest banks, boasting nearly $2.6 trillion in assets. It's been around forever and does a little bit of everything within the money realm. This size and diversification translates into staying power.
That doesn't mean things are always easy. For instance, BofA found itself in some serious trouble thanks to 2007's subprime mortgage meltdown and subsequent banking crisis. In 2008, it cut its dividend to the point of practically outright suspending it and didn't start raising it again until 2014.
In other words, BofA's not completely immune to economic headwinds.
Given how well it's holding up against the current rise of delinquencies and defaults, however, the big bank has clearly learned a thing or two in the meantime; stricter banking regulations may have helped.
Although last quarter's total nonperforming loans swelled nearly 17% to $5.8 billion and charge-offs grew more than 60% year over year to $1.5 billion, net income is still holding up. It's also holding up more than enough to fully cover the dividend. Last quarter's per-share profit of $0.81 may be down from the year-earlier comparison of $0.90, but it's also well above the stock's current quarterly dividend of $0.26 per share. That's a big reason the bank's been able to -- with the exception of the pandemic-riddled 2020 -- maintain a healthy streak of yearly dividend growth.
BofA stock's forward-looking dividend yield of 2.2% isn't exactly thrilling. What it lacks in beefiness, however, it more than makes up for in resiliency. There will never be a time when the world doesn't need its services. It also seems unlikely that there will ever be a time when Bank of America won't be one of the industry's leaders, as well as one of its best bets for investors.
2. W. P. Carey
While Bank of America is a household name, W. P. Carey(NYSE: WPC) isn't. Indeed, there's a good chance you've never even heard of it.
Don't be fooled by its lack of familiarity, though. There's also a good chance you regularly benefit from the service this company provides.
See, W. P. Carey is a real estate investment trust, or REIT, for short. That just means it owns rental real estate like apartment complexes, strip malls, hotels, industrial properties, and the like. REITs are popular investment vehicles for rent-generating real estate businesses because the majority of any profits are passed along to shareholders without first being taxed at the corporate level (although shareholders are still taxed accordingly on any dividend income or growth a REIT produces).
Even by real estate investment trust standards, though, W. P. Carey is a bit unique. It's what's called a net lease REIT, which means it's the renter rather than the landlord that's responsible for costs such as taxes, insurance, and maintenance. Such agreements take a great deal of risk off of the property owner and put it onto the tenant. This, of course, makes a REIT more attractive to investors.
While lower-risk, being a net lease REIT doesn't necessarily make W. P. Carey risk-free. Anyone who's kept tabs on the company for a while now likely knows it reduced its usual quarterly payout by nearly 20% at the end of last year. It was a surprising step for a real estate investment trust of this apparent caliber.
In retrospect, however, it was an understandable (and correct) decision. W. P. Carey's office-building operations had been struggling since the pandemic prompted many companies to let employees start working from home. With no real relief on the horizon on this front, the REIT opted to pull the plug and get out of most of its office space business by selling these properties. Its remaining properties and subsequent rent payments are holding up nicely, with an occupancy rate of 98.8% as of the end of September.
Newcomers will be plugging into W. P. Carey while its forward-looking yield stands at just under 6.3%.
3. British American Tobacco
Finally, add British American Tobacco(NYSE: BTI) to your list of dividend stocks that could generate reliable passive income for decades ahead.
Just as the name suggests, British American Tobacco is a U.K.-based cigarette and smokeless tobacco name. It's also in the vaping and heated tobacco business, with platforms like Vuse, but the bulk of its revenue still stems from sales of cigarette brands like Pall Mall, Lucky Strike, and Camel.
At first blush, it seems like a questionable dividend stock pick. Most everyone understands that smoking poses significant health risks. There's also a widespread feeling that global smoking cessation is getting traction. The World Health Organization reports that the number of worldwide smokers has fallen from one out of every three in 2000 to only one out of every five now. Not bad.
The pace of cessation's progress is slowing, though, and is being offset by sheer population growth. The WHO predicts there will still be almost 1.2 billion tobacco users in 2030, which is down only slightly from around 1.25 billion now. The rise of alternatives like vaping or heated tobacco could further offset the impact of an already-slowing decline in smoking.
This doesn't mean the tobacco industry -- including British American -- won't eventually meet its end. It will almost certainly do so at some point in the future. Even this company itself is "committed to building a smokeless world." It remains to be seen if there's an alternative profit center that can fully replace cigarettes. If not, BAT stock will slowly but surely wither away.
Investors will be stepping into a stock with a healthy forward-looking dividend yield of more than 8%, however. And that's based on a dividend that's not only well-supported but capable of growing for a long time, even if the stock itself is pressured lower during this period. It's arguably well worth that risk.
Should you invest $1,000 in Bank of America right now?
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Bank of America is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool recommends British American Tobacco P.l.c. and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.
