i it would be say there are more ways to generate passive income than you can shake a stick at. However, that expression may not be true, depending on how big your stick is and how committed you are to shaking it. However, there are many ways to make passive income.
Buying dividend stocks is one of the best methods. If you have a tidy sum of cash to invest and can find stocks with particularly juicy dividend yields (and the ability to keep those dividends coming), you can potentially rake in income significant passive. The good news is that such stocks are not hard to find. Investing $134,800 in these three high yielding dividend stocks could make you $10,000 in reliable passive income in 2025.
The capital of Ares(NASDAQ: ARCC) is the largest publicly traded business development company (BDC). As a BDC, Ares provides financing primarily to middle market businesses with market caps between $100 million and $1 billion. It has approximately $464 billion in assets under management, and over half of its assets are senior first lien secured notes.
BDCs must return at least 90% of their earnings to shareholders as dividends to be exempt from federal income taxes, so their dividend yields tend to be quite high. Ares Capital is no exception with its forward dividend yield of 8.72%. If you invested a third of an initial $134,800 (about $44,933), you would receive a passive income of almost $3,919 in 2025.
While there is always a risk that a particular company could cut its dividend, I believe Ares Capital's dividend is solid. CFO Scott Lem highlighted the company's Q3 update, “Our conservative approach to investing and financing our balance sheet has enabled us to pay a stable quarterly dividend to grow regularly for our shareholders for over 15 years.”
The traditional middle market presents a $3 trillion market opportunity. The liquid addressable credit market for companies with annual revenues of more than $1 billion adds another $2.4 trillion to Ares Capital's total addressable market. With more companies turning to direct lending for its convenience and speed of execution, I expect that Ares Capital's business will continue to grow – and its dividends will continue to flow.
Enterprise Products Partners(NYSE: DPC) among the largest midstream energy companies in the United States It operates over 50,000 miles of pipelines that transport natural gas liquids (NGLs), crude oil, natural gas, and petrochemicals. The company's other midstream assets include 42 natural gas processing trains, 26 frackers, and facilities capable of storing over 300 million barrels of liquid hydrocarbons.
Invest in limited partnerships (LPs)such as Enterprise Products Partners, comes with some additional tax filing hassles. However, I think the trouble is worth it, as Enterprise offers a forward distribution yield of 6.76%. A third of your initial $134,800 would provide just over $3,037 in annual income.
I'll bet your actual passive income in 2025 will be even higher. Why? Enterprise Products Partners has increased its distribution for 26 consecutive years. The chances look very good that the company will extend that streak this year.
Enterprise Products Partners' business is weathering the recession. Fluctuations in oil and gas prices do not affect its revenue much. Around 90% of its long-term contracts contain inflation protection provisions. It is no surprise that Menter has been able to generate strong cash flow per unit during good times and bad times for the energy sector.
Most investors are probably already familiar with them Verizon Communications(NYSE: VZ). The company is a telecommunications giant that serves millions of consumers and businesses (including nearly all of the Fortune 500).
Verizon has been popular with income investors for years – and still is, with its incredibly high 6.79% forward dividend yield. If you invested the last third of the initial $134,800 in the stock, you should receive about $3,051 in annual income. That brings your total passive income for 2025 with these three stocks to just over $10,000.
However, I suspect that Verizon could make that total a bit higher. The company has increased its dividend for 18 consecutive years. My view is that 2025 will increase the count to 19.
Could Verizon's proposed acquisition Frontier Communications have a negative effect on its ability to fund the dividend? I don't think so. Verizon expects the deal to be an immediate boost to its revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Before you buy stock in Ares Capital, consider this:
The Motley Fool Stock Advisor a team of analysts just noted what they believe is the top 10 stocks for investors to buy now… and Ares Capital was not one of them. The 10 stocks that made the cut could generate monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $842,611!*
Stock Advisor gives investors an easy-to-follow blueprint for success, including guidance on portfolio construction, regular analyst updates, and two new stock picks every month. TheStock Advisorservice has more than four S&P 500 return since 2002*.
Keith Speights He holds positions at Ares Capital, Enterprise Products Partners, and Verizon Communications. The Motley Fool recommends Enterprise Products Partners and Verizon Communications. The Motley Fool has a disclosure policy.
