What is a good example of an income stock?

Realty Income is a good example of an income stock. The REIT pays a monthly dividend and typically has an above-average yield (over 5% in mid-2026 compared to around 1% for the S&P 500). Realty Income also has a long history of dividend growth (more than 30 consecutive years).

Are income stocks a good investment?

Income stocks can be good investments. Historically, dividend stocks have produced much higher returns compared to non-dividend payers (9.2% versus 4.2% from 1973-2025, according to data from Ned Davis Research and Hartford Funds). However, the highest total returns have historically come from dividend growers (10.2% annualized), which have outpaced stocks with no change in their dividend policy (6.9% annualized) and dividend cutters and eliminators (-1.0%). So, a good income stock investment would be a company that pays a growing dividend and can sustain it.

What is the average return on income stocks?

According to data from Ned Davis Research and Hartford Funds, the average dividend payer in the S&P 500 delivered a 9.2% average annual total return over the last 50 years.

Are income stocks high risk?

Income stocks can be high- or low-risk; it depends on the underlying company. Many companies with higher payout yields have lower risk profiles because they generate stable cash flows and maintain strong balance sheets. However, others have higher risk profiles due to more volatile cash flows and weaker financial positions. Investors need to carefully assess a company's financial situation before buying shares for income.

Can income stocks provide both income and capital appreciation?

Yes, many income stocks can provide both income and capital appreciation. If the company is growing its earnings and dividends, it also tends to provide capital appreciation. However, the bulk of the return from higher-yielding stocks typically comes from dividend income rather than capital appreciation.

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Best Income Stocks for Passive Income

By Matthew DiLallo – Updated Aug 12, 2026 at 2:48 PM EST | Fact-checked by Frank Bass

Key Points

Income stocks pay regular dividends, offering reliable passive income and less volatility.
Top picks like PepsiCo and Verizon have high yields and deliver consistent dividend growth.
Diversifying with income stocks across different sectors can stabilize your portfolio.

For investors who want their portfolio to work for them, income stocks are one of the most reliable tools available. These are stocks that pay regular dividends, providing you with a steady stream of cash while you hold the shares. You can use that income to cover expenses, reinvest it to compound your returns over time, or both.

Income stocks also tend to be less volatile than growth stocks, making them a stabilizing force in almost any portfolio. Here is what to know about income stocks and our top picks to consider.

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What are income stocks?

An income stock is any stock that pays a relatively reliable dividend, a regular cash distribution drawn from company profits. Most companies pay dividends quarterly, though some pay annually, semi-annually, or monthly. The return you earn is expressed as a dividend yield, calculated by dividing the annual dividend payment by the share price. A stock paying $1 in annual dividends and trading at $20 has a 5% dividend yield.

The best income stocks do more than just pay a dividend. They grow it consistently over time. A company increasing its dividend by 10% annually doubles its payout in just over seven years, and rising dividends tend to push share prices higher as well, giving income investors both passive cash flow and capital appreciation.

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Top income stocks to consider

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Ticker Information Table
Name and ticker	Market capMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.	Dividend yield	Industry
PepsiCo (NASDAQ:PEP)	$195.8 billion	4.01%	Beverages
Verizon Communications (NYSE:VZ)	$205.5 billion	5.65%	Diversified Telecommunication Services
Realty Income (NYSE:O)	$59.2 billion	5.18%	Retail REITs
Johnson & Johnson (NYSE:JNJ)	$651.3 billion	1.94%	Pharmaceuticals
NextEra Energy (NYSE:NEE)	$174.5 billion	2.84%	Electric Utilities

Data as of Aug 23, 2026. Showing 5 of 5 total entries.

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1. PepsiCo

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NASDAQ: PEP

PepsiCo

Today's Change

(0.98%) $1.40

Current Price

$143.48

Key Data Points

Market Cap

$196B

Day's Range

$141.64 - $143.56

52wk Range

$133.73 - $171.48

Volume

6.6M

Avg Vol

8.6M

Gross Margin

53.98%

Dividend Yield

4.01%

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NYSE: VZ

Verizon Communications

Today's Change

(0.53%) $0.26

Current Price

$49.45

Key Data Points

Market Cap

$205B

Day's Range

$49.17 - $49.72

52wk Range

$38.39 - $51.68

Volume

15.1M

Avg Vol

27M

Gross Margin

45.71%

Dividend Yield

5.65%

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Verizon Communications' (VZ +0.53%) mobile and broadband customers provide a reliable base of revenue and cash flow. Verizon expects to generate over $21.5 billion of free cash flow after funding capital expenditures in 2026. That's a 9%-10% increase from 2025's level and will easily cover its expected annual dividend outlay of around $12 billion.

Verizon's shares offered a hefty dividend yield of about 6% in mid-2026. The telecom giant has also increased its dividend for 19 straight years, the longest current streak in the U.S. telecom sector. Verizon's attractive, growing income stream makes it a great stock for generating passive income.

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3. Johnson & Johnson

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NYSE: JNJ

Johnson & Johnson

Today's Change

(1.07%) $2.87

Current Price

$270.24

Key Data Points

Market Cap

$651B

Day's Range

$267.00 - $272.65

52wk Range

$173.33 - $276.47

Volume

6.2M

Avg Vol

Gross Margin

68.03%

Dividend Yield

1.94%

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Healthcare behemoth Johnson & Johnson (JNJ +1.07%) pays a very healthy dividend. It offered a dividend yield of more than 2% in mid-2026, double the S&P 500's level. Meanwhile, it has 64 consecutive years of dividend increases, following a 3.1% increase in April 2026.

The healthcare company is a financial fortress. It had an elite AAA bond rating (higher than the U.S. government). Johnson & Johnson ended the second quarter of 2026 with $20.8 billion in cash and $49 billion in debt. Meanwhile, it generated $8.7 billion in free cash flow in the first half of the year, more than enough to cover the $6.8 billion it paid in dividends.

Johnson & Johnson expects to grow its operational sales at a 5%-7% annual rate through 2030, driven in part by a target to reach $50 billion in oncology sales by that year. Meanwhile, its strong balance sheet will give it the flexibility to make acquisitions to further boost its growth (it acquired Firefly Bio for $1 billion in 2026 to expand its oncology platform). These factors put it in a strong position to continue increasing its dividend.

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4. Realty Income

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NYSE: O

Realty Income

Today's Change

(-0.90%) $-0.57

Current Price

$62.60

Key Data Points

Market Cap

$59B

Day's Range

$62.50 - $63.40

52wk Range

$55.86 - $67.94

Volume

4.1M

Avg Vol

5.9M

Gross Margin

50.82%

Dividend Yield

5.18%

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Realty Income (O -0.90%) has been a dependable income stock over the years. The real estate investment trust (REIT) delivered its 115th consecutive quarter of dividend increases in mid-2026 and has boosted its payout 135 times since its initial public offering (IPO) in 1994. It has delivered 31 years of dividend growth, placing it in the elite Dividend Aristocrats® category. (The term Dividend Aristocrats® is a registered trademark of Standard & Poor's Financial Services LLC.)

The REIT focuses on investing in essential retail properties (think home improvement, grocery, and convenience stores), industrial real estate, and other properties (such as data centers and gaming properties). It triple-net (NNN) leases the freestanding properties to high-quality tenants, making them responsible for building insurance, maintenance, and real estate taxes, and providing Realty Income with very stable income.

It steadily buys new income-producing properties ($10 billion investment volume planned for 2026), which should allow the REIT to continue increasing its attractive monthly dividend. Realty Income yielded more than 5% in mid-2026.

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5. NextEra Energy

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NYSE: NEE

NextEra Energy

Today's Change

(-1.62%) $-1.38

Current Price

$83.65

Key Data Points

Market Cap

$174B

Day's Range

$83.54 - $85.27

52wk Range

$69.24 - $98.75

Volume

11.9M

Avg Vol

11.5M

Gross Margin

35.80%

Dividend Yield

2.84%

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NextEra Energy (NEE -1.62%) has an excellent income track record. The utility is also a Dividend Aristocrat®, with over 30 years of dividend growth. Over the past two decades, NextEra has increased its dividend at a 10% annualized rate.

It's one of the leaders in producing renewable energy and has an extensive backlog of development projects. Combine that growth with the stability of its utility operations, and NextEra should have plenty of power to keep expanding its earnings and dividend in the future. In July 2026, NextEra joined forces with Brookfield (BAM +1.51%) on a $100 billion data center and power project in the U.S. It will build the gas-fired power plants and battery storage assets to power Brookfield's data center campus. It also agreed earlier in the year to merge with fellow utility Dominion Energy (D -1.29%) in a $67 billion deal to create the world's largest electric utility. The combined company expects to grow its adjusted earnings per share at more than 9% annually through 2032. That support's NextEra's plan to increase its dividend (which yielded almost 3% in mid-2026) by 6% annually in 2027 and 2028.

Income stocks vs. value stocks vs. growth stocks

Income, value, and growth stocks are different categories of stocks based on what they offer investors. Here are some key characteristics of each group and what type of investors might be more interested in the different categories:

Income stocks: An income stock is any company that pays a higher-yielding dividend that investors would purchase to produce passive income. Some companies tend to prioritize income generation due to stable cash flows and slower growth. For example, many pipeline stocks, REITs, and utilities tend to be good income stocks. Income stocks are ideal investments for retirees or those seeking lower-risk investments.
: Value stocks are companies that trade at lower compared to the broader market, their closest peers, or their historical average. Value stocks often trade at a lower valuation for a reason. They've encountered financial difficulties, their growth rate has slowed, they're facing increased competition, or the market has sold off. Investors such as prefer value stocks because they believe they can earn attractive returns by paying reasonable prices for high-quality companies. Many value stocks pay dividends, making them attractive income stocks as well.

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How to invest in 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 income 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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Income stocks FAQ

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About the Author

Matt DiLallo has been a contributing Motley Fool stock analyst specializing in the energy, industrials, and real estate sectors since 2012. He also covers dividend-paying stocks, pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

TMFmd19

@MatthewDiLallo

Matt DiLallo has positions in Johnson & Johnson, NextEra Energy, PepsiCo, Realty Income, and Verizon Communications. The Motley Fool has positions in and recommends NextEra Energy and Realty Income. The Motley Fool recommends Johnson & Johnson and Verizon Communications. The Motley Fool has a disclosure policy.

Best Income Stocks for Passive Income

Key Points

What are income stocks?