I He was Let’s say there are more ways to generate passive income than you can shake a stick at. However, this expression may not be correct, depending on the size of your stick and how committed you are to shaking it. However, there are plenty of ways to make passive income.
Buying dividend stocks is one of the best ways. If you have a tidy sum of cash to invest and can find stocks with particularly good dividend yields (and the ability to keep those dividends coming), you can potentially generate significant passive income. The good news is that such stocks are not difficult to find. Investing $134,800 in these three high-yielding stocks could set you up with $10,000 in reliable passive income in 2025.
Ares Capital (Nasdaq: ARCC) It is the largest publicly traded Business Development Company (BDC). As a BDC, Ares provides financing primarily to middle market companies with market capitalizations between $100 million and $1 billion. It has approximately $464 billion in assets under management, with more than half of its assets being first lien secured bonds.
Business development companies (BDCs) must return at least 90% of their profits to shareholders as dividends in order to be exempt from federal income taxes, so their dividend yields tend to be very high. Ares Capital is no exception with its forward dividend yield of 8.72%. If you invested one-third of the initial amount of $134,800 (about $44,933), you would have passive income of about $3,919 in 2025.
While there’s always a risk that a given company will cut its dividend, I think Ares Capital’s dividend is strong. “Our conservative approach to investing and financing our balance sheet has enabled us to pay consistent and growing quarterly dividends to our shareholders for more than 15 years,” CFO Scott Lim noted in the company’s third-quarter update.
The traditional middle market presents a $3 trillion market opportunity. The addressable liquid credit market for companies with more than $1 billion in annual revenue adds another $2.4 trillion to Ares Capital’s total addressable market. As more companies turn to direct lending due to its ease and speed, I expect Ares Capital’s business will continue to grow – and its profits will continue to flow.
Enterprise Product Partners (NYSE: EBD) It is among the largest mid-cap energy companies in the United States. It operates more than 50,000 miles of pipelines transporting natural gas liquids, crude oil, natural gas and petrochemicals. The company’s other transportation assets include 42 natural gas processing trains, 26 fractionators, and facilities that can store more than 300 million barrels of liquid hydrocarbons.
Invest in Limited partnerships (LPs)like Enterprise Products Partners, comes with some additional hassles of filing taxes. However, I think the trouble is worth it, as Enterprise offers a forward distribution yield of 6.76%. One-third of your initial $134,800 will provide just over $3,037 in annual income.
I bet your actual passive income in 2025 will be higher than that. Why? Enterprise Products Partners has increased its distribution for 26 consecutive years. Chances look very good that the company will extend this line this year.
Enterprise Product Partners’ business is recession-proof. Its revenues are not greatly affected by fluctuations in oil and gas prices. About 90% of its long-term contracts include inflation protection provisions. Unsurprisingly, Enterprise has been able to generate strong cash flow per unit through good times and bad times for the energy sector.
Most investors are probably already aware Verizon Communications (NYSE: VZ). The company is a telecommunications giant serving millions of consumers and businesses (including nearly all Fortune 500 companies).
Verizon has been popular among income investors for years — and still is, with its very high forward dividend yield of 6.79%. If you invested the last third of your initial $134,800 in the stock, you should have an annual income of about $3,051. This brings your total passive income for 2025 with these three stocks to just over $10,000.
I suspect Verizon can raise that total somewhat. The company has increased its profits for 18 consecutive years. My hunch is that in 2025 the number will rise to 19.
Verizon’s pending acquisition could be on Border communications Does it negatively affect its ability to finance dividends? i don’t think so. Verizon expects the deal to immediately boost its revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
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Keith Speights He has positions at Ares Capital, Enterprise Products Partners, and Verizon Communications. The Motley Fool recommends Enterprise Product Partners and Verizon Communications. The Motley Fool has Disclosure policy.
Investing $134,800 in these 3 high-dividend stocks could earn you a reliable passive income of $10,000 in 2025. Originally published by The Motley Fool