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Passive income is the dream of many investors as it provides a steady flow of cash without active involvement. Dividend stocks have long been a popular choice for those looking to earn passive income, but are they really the best option? In this article, we explore the appeal of dividend stocks and review three alternative options that could potentially offer even better returns.
The attractiveness of dividend stocks
Dividend stocks offer investors regular income in the form of quarterly or monthly payouts and the potential for capital appreciation as the share price rises. The most popular options among dividend investors include AT&T Inc. (NYSE:T) and Pfizer Inc. (NYSE:PFE).
AT&T is known for its high yield, with a dividend yield of 6.30% and an annual payout of $1.11 per share. However, the company’s dividend growth has stalled in recent years, with a 5-year CAGR of -6.16% and no dividend increase in the past year.
Pfizer, on the other hand, offers a dividend yield of 6.07% and an annual payout of $1.68 per share. The company has a strong track record of increasing dividends, with 13 consecutive years of increases and a 5-year CAGR of 4.59%. However, Pfizer’s payout ratio of 116.20% suggests that the current dividend may not be sustainable in the long term.
Despite their attractive yields, dividend stocks also have their drawbacks. They are vulnerable to market volatility, and a falling share price can wipe out the returns generated by dividends. For example, AT&T’s share price has fallen by about 27.5% over the past five years, resulting in a total return of just 7% over that period. Similarly, Pfizer’s share price has fallen by about 32% over the past five years, resulting in a total return of -16.5%.
Alternative passive income options you should consider
While dividend stocks can be a reliable source of passive income, they are not the only option available to investors. In fact, exploring alternative investments can help diversify your portfolio and potentially generate even higher returns. Here are three alternative passive income options worth considering:
Partial ownership of real estate
Arrived is a groundbreaking platform that allows investors to purchase shares in rental properties with minimal capital, making real estate investing accessible to a wider audience. Backed by Jeff Bezos, Arrived has a proven track record with over $161 million in assets under management and an average annual dividend yield of 4.2%.
One of the main benefits of investing through Arrived is the low entry point. With a minimum investment of just $100, anyone can start building a diversified real estate portfolio and earning passive income from rental properties. Arrived’s user-friendly platform and experienced property management team make the process simple and straightforward, allowing investors to sit back and watch their investments grow while earning monthly rental income.
Real estate has long been considered a hedge against stock market volatility, and Arrived makes it easier than ever to add this valuable asset class to your portfolio. By investing in rental properties through Arrived, you can enjoy the benefits of owning property without the responsibilities of being a landlord.
Click here to explore the investments currently available on the Arrived platform.
Private loans through the Ascent Income Fund via EquityMultiple
The Ascent Income Fund EquityMultiple’s offers an attractive opportunity for accredited investors interested in higher returns from private credit investments. With a historical distribution yield of 12.1%, this fund focuses on senior commercial real estate credit positions and offers investors the potential for significant returns.
The Ascent Income Fund is designed for investors who understand the risks and rewards of investing in private credit. By targeting senior positions in commercial mortgages, the fund is designed to mitigate risk while still providing attractive returns. And with a reduced $5,000 minimum investment for first-time investors, the fund is now more accessible than ever.
EquityMultiple’s experienced team of real estate professionals carefully selects and manages the fund’s investments, ensuring that each opportunity is thoroughly vetted and aligns with the fund’s objectives. With a focus on capital preservation and quarterly liquidity options, the Ascent Income Fund is an interesting option for investors looking to diversify their passive income streams.
Click here to learn more about the Ascent Income Fund and how you can take advantage of this high-yield opportunity.
Personal Loan About Arrived Personal Loan Fund
For non-accredited investors looking to tap into the private credit market, Arrived Private credit fund offers an exciting opportunity. With a target return of 7% – 9% and a low minimum investment of just $100, this fund makes private credit investing accessible to a wider range of investors.
Arrived’s Private Credit Fund invests in short-term loans used to finance professional real estate projects such as property renovations, refurbishments or the construction of new homes. These loans are secured by residential real estate, providing additional protection to investors. The fund’s focus on residential real estate and its diversified loan portfolio help mitigate risk while still offering the potential for attractive returns.
One of the key benefits of the Private Credit Fund is its monthly dividend payouts, which provide investors with a steady passive income. And with quarterly liquidity options, investors have the flexibility to access their capital when needed. For those who do not qualify as an accredited investor, Arrived’s Private Credit Fund offers a unique opportunity to participate in the private credit market and potentially earn higher returns than traditional fixed income investments.
Click here to start building an income portfolio through the Arrived Private Credit Fund starting at just $100.
Comparison of dividend stocks and alternative options
When considering passive income investing, it’s important to understand the different risk levels and potential returns associated with each option. Dividend stocks may offer more liquidity, but alternative options such as fractional real estate ownership and private debt funds may be able to provide higher returns.
Diversification is also key when building a passive income portfolio. By spreading your investments across different asset classes and strategies, you can minimize risk and ensure a more consistent income stream.
While dividend stocks like AT&T and Pfizer remain a solid option for generating passive income, they are not the only option. Fractional real estate ownership and private debt investments can offer attractive alternatives with the potential for higher returns and greater diversification.
Take the time to explore these alternative passive income investments in more detail and consider how they might fit into your overall financial strategy. With the right approach and a well-diversified portfolio, you can work toward achieving your passive income goals and securing your financial future.
Learn more about each of these alternative income investments here:
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