Want Decades of Passive Income? 3 Stocks to Buy Now and Hold Forever

Passive income is a wonderful thing to generate from your investment portfolio. But that income stream is only as strong as the companies that back the dividends you are collecting. In other words, it isn't a good idea to reach for yield if you are looking to collect decades of passive income. But don't fret -- here are three stock options that mix generous yields with impressive businesses.

1. Bank of Nova Scotia is working through some headwinds

Bank of Nova Scotia (NYSE: BNS) , more commonly known as Scotiabank, has the highest dividend yield on this list at 6.6%. The reason for that is fairly simple: It has been lagging its banking peers on key performance metrics like earnings growth, return on equity, and return on risk-weighted assets.

Management recognizes the issue and is working to update its business approach, which will entail exiting less desirable markets in South America and refocusing on its most desirable regions.

Wall Street is rightly worried about two things. First, the laggard performance is largely because Scotiabank has chosen to avoid the U.S. market in favor of South America. Emerging markets offer higher long-term growth prospects, but the bank clearly needs to fine-tune its approach.

Second, the turnaround will probably take some time to play out. In fact, the dividend isn't expected to be increased in 2024. However, Scotiabank has paid dividends since 1833, so it's pretty clear that dividends are important to management.

If you can handle a bit of near-term uncertainty, you'll be paid very well to wait for this bank to improve its performance. Note that the average bank's yield is just 2.9% or so.

2. Agree Realty is growing fast

Agree Realty 's (NYSE: ADC) dividend record doesn't come close to either of the other stocks on this list, since it has only been on the rise for about a decade. It was also cut in 2011, but that cut actually helps set up the story for buying this real estate investment trust (REIT) today.

In 2011, the landlord owned fewer than 100 properties, and the bankruptcy of a single tenant necessitated a dividend cut. But today, Agree owns a portfolio of more than 2,200 properties. Simply put, it is not the same REIT it was a decade ago.

But what exactly is Agree today? Well, it is one of the largest net lease REITs (a net lease requires tenants to pay most property-level operating costs). And it has been growing at a fairly rapid clip, largely thanks to the small starting size. The best place to see this is in the dividend, where annualized growth over the past decade was around 6% a year. That's nearly twice as fast as the company's largest net lease REIT peers. Dividend growth types will like Agree's story.

To be fair, Agree's dividend growth could slow down from here. But the largest net lease REIT, Realty Income , owns more than 15,400 properties. So there's still a long runway for growth ahead for Agree and its dividend. The yield is an attractive 4.5%, compared to roughly 4.2% for the average REIT.

3. T. Rowe Price is on rock-solid ground

The balance sheet is where you see T. Rowe Price 's (NASDAQ: TROW) most important asset. In this case, it is the lack of long-term debt that's most important. Companies without debt tend to survive difficult times much better than peers that make heavy use of leverage. Simply put, T. Rowe Price doesn't have to worry about long-term interest costs because it has none. That's the foundation underpinning the financial company's streak of 38 consecutive annual dividend increases.

That said, T. Rowe Price and its lofty 4.3% yield are not for the faint of heart. That's because the company is an asset manager, which means its income is derived from the management fees it charges clients. Thus, assets under management (AUM) are a big determinant of the company's top and bottom lines. But AUM can vary greatly based on the performance of the stock market, which is prone to swift upswings and downswings.

That clearly hasn't been an impediment to dividend growth over time, but if you prefer boring stocks, T. Rowe Price will probably be best watched from the sidelines. However, if you can handle a bit of uncertainty, this debt-free company's yield is near the highest levels in its history, suggesting the stock is on sale right now.

The company behind the dividend matters

A high-yield stock that cuts its dividend isn't likely to be very rewarding for investors over the long term. And if you are looking for passive income, a dividend cut means less income. You'll be better off owning stocks that have strong business fundamentals and histories of rewarding investors well via dividend increases. That's exactly what you'll find at Bank of Nova Scotia, Agree Realty, and T. Rowe Price.

Reuben Gregg Brewer has positions in Bank Of Nova Scotia and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Bank Of Nova Scotia and T. Rowe Price Group. The Motley Fool has a disclosure policy .