Income stocks produce a relatively stable income stream for investors. They can use this income to cover their expenses or reinvest it to buy more shares. Another benefit of investing in income stocks is that they're less volatile than growth stocks. These features make them a good addition to any portfolio, especially when seeking more stability.
Here's how to create a passive income investing strategy. We'll also take a look at some of the best income stocks to buy.
What are income stocks?
There are many types of stocks. An income stock is one that pays a relatively reliable dividend -- a portion of the company's profits-- to its shareholders. Dividend payments are typically cash disbursements that some companies regularly send to their investors.
Most companies pay quarterly dividends, although some provide income only annually or semi-annually. A few companies pay monthly dividends, making them ideal income stocks.
Unlike growth stocks, which investors buy primarily because they expect the share price to increase, income stocks are attractive to investors who want to earn passive income in cash. Investors earn a dividend yield, which is calculated by dividing the total annual dividend payments by the stock price. If a stock that pays a quarterly dividend of $0.25 per share (equal to $1 in annual payments) is trading for $20 per share, then its dividend yield is 5%.
Best income stocks in 2025
The best income stocks offer an above-average dividend yield and have consistently increased their cash payouts over time. For example, a stock with dividend payments that increase by 10% annually doubles its cash payout to shareholders in a little more than seven years.
Dividend growth tends to drive a stock's price higher. Investors are typically willing to pay more for stocks that offer rising cash payouts, so investors in these companies enjoy the best of both worlds: passive income and stock price appreciation.
Here's a look at some of the best income stocks to consider.
1. Coca-Cola
NYSE: KO
Key Data Points
Coca-Cola (KO +2.16%) pays a well-above-average dividend. The beverage giant's dividend yield topped 3% in late 2025, more than double the S&P 500's dividend yield of less than 1.5%.
Coca-Cola also has a terrific record of increasing its dividend. The company delivered its 63rd consecutive annual dividend increase in early 2025. That kept it in the elite group of Dividend Kings, companies with 50 or more years of consecutive dividend increases.
The beverage behemoth should have no trouble continuing to supply investors with a rising stream of dividend income in the future. The company's long-term goal is to grow its earnings per share at a high single-digit annual rate. With its earnings on the rise and a strong balance sheet, Coca-Cola should have plenty of pop to continue pushing its payout higher.
2. Verizon
NYSE: VZ
Key Data Points
3. Johnson & Johnson
4. Realty Income
NYSE: O
Key Data Points
5. NextEra Energy
NYSE: NEE
Key Data Points
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How to invest in stocks
Anyone can invest in income stocks. Here's a step-by-step guide on how to add income stocks to your investment portfolio:
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
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