Forget Buying Rental Property: Delve Into Dividend Stocks for Easy Passive Income

Forget Buying a Rental Property: Investing $50,000 in These Ultra-High Dividend Yield Stocks Could Make You $4,500 in Passive Income

These stocks pay reliable and growing dividends. Plus, they require much less work than owning a rental property. The internet is awash with claims that the secret to financial independence is buying real estate and renting it out as 'passive' income. The problem with real estate investing is that it is not as passive as the internet claims. Maintaining a rental property requires work, as landlords must manage tenants, fix damage, and continuously search for occupants.

Altria Group: Price increases and selling minority stakes

Our first stock is Altria Group (NYSE: MO). This is a tobacco stock that sells Marlboro cigarettes (and others) in the United States, which is the largest driver of profits for shareholders. On top of cigarettes, the company owns cigar brands, nicotine pouches, and a vaping business, although they are much smaller than cigarettes today.

• Cigarette volumes have been declining in the United States for the last few decades.
• Altria has been able to raise the price of cigarette packs for many years to counteract volume declines, leading to consistent growth in operating income and cash flow.
• Altria has started to sell off part of its stake in Anheuser Busch in order to fuel share buybacks, helping increase dividend payouts.

British American Tobacco: betting on a new generation

The second stock in this pairing is British American Tobacco (NYSE: BTI). Like Altria, it is one of the world's largest tobacco companies, and it has counteracted volume declines by consistently raising prices.

• It owns brands including Camel, Newport, and Lucky Strike and has non-cigarette business units that are growing rapidly.
• The company's 'new categories' of nicotine products generated $4.2 billion in revenue last year and are turning a profit.

Add it all together, and a $50,000 investment into Altria Group and British American Tobacco can generate approximately $4,500 in annual passive income. This strategy offers a truly passive income opportunity compared to the active management needed for rental properties.