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Investing in dividend stocks is my go-to idea when looking to increase my own passive income. Here are three stocks I own that are giving me a second income.
A mining boom
Human beings have been mining since before the Bronze Age and we won’t stop anytime soon. Without iron ore, there would be no new airports or bridges. Without cobalt, there would be no advanced laptops or smart phones.
And above all, there will be no green revolution without mining. Copper is necessary for the electrification of the planet. Iron ore (used to make steel) is needed for wind turbines. Lithium is an essential component of electric vehicle (EV) batteries.
Actions to benefit
Which brings me to BlackRock Global Mining Trust. This is a very successful investment fund that has built a portfolio of the world’s best miners.
It is the companies that produce the metals and minerals that build the world around us and, more importantly, the greener environment in which we all aspire to live.
The stock now has a consistent dividend yield of 6.3%. And the trust has increased its dividend at a compound annual growth rate (CAGR) of 20.7% over the past five years. That’s well ahead of inflation.
I also own shares in a lithium producer Chemical and Mining Society of Chile (m²). This company operates in Chile, which has the largest known lithium reserves on Earth.
As a key battery material for electric vehicles, the demand for lithium is expected to skyrocket in the coming decades. SQM stock is expected to return 10% this year!
I like dividends
The third stock is McDonald’s (NYSE: MCD), which has a dividend yield of 2.3%. The global fast-food franchise has increased its payouts to shareholders for decades. This makes him a dividend aristocrat.
Additionally, the stock price has risen 73% in five years, outpacing average market returns. As most other businesses fold this year, McDonald’s is gearing up for continued growth. It plans to open 1,900 new locations in 2023!
The company’s free cash flow for the last fiscal year was $5.5 billion – that’s the money used to pay rising dividends. And I think that should continue.
I should note that every action carries a risk. Despite long-term tailwinds supporting a mining boom, the industry remains cyclical. It comes and goes with the economic cycle. This means that dividends are reduced from time to time as supply exceeds demand.
Similarly, consumers could reduce their trips to McDonald’s if cash is tight. That said, McDonald’s is a timeless brand. I ate there as a kid 30 years ago and now take my young daughter there (as an occasional treat, of course!).
Thus, the company can weather any economic downturn. In fact, it benefits. Consumers flock to the restaurant for its budget-friendly menu as inflation bites.
I think the company can keep adding a few pennies here and there to its menu items for the rest of my life. This will support earnings and keep those dividends up.
And the green transition will take decades, meaning miners will have to produce more metal than ever before. This gives me great confidence that passive income from the mining trust and SQM will continue to flow into my brokerage account.