Make money without exerting any effort. That's the idea with passive income.
It's actually a stretch, though, to say there's no effort involved. Typically, a lot of effort is required to make the money needed initially to generate passive income. You'll also likely have to put forth some effort in figuring out exactly how to achieve the goal.
Investing in stocks that pay high dividend yields is one of the easiest ways to make money without working for it. Here are three high-yield dividend stocks that could be passive-income machines.
1. Devon Energy
You won't find many members of the S&P 500 with more attractive dividends than Devon Energy (DVN 3.13%). The oil and gas producer's dividend yield currently stands at 8.9%. Since the second quarter of 2021, Devon's dividend payout has more than tripled.
The dividend isn't the only way that the company is rewarding shareholders. Devon's share price has skyrocketed close to 60% year to date. This impressive performance follows a huge gain of 179% in 2021.
Devon also continues to repurchase its shares. As of the end of July 2022, the company had spent $1.2 billion to buy back around 4% of its shares. With the stock still arguably undervalued even after its meteoric rise, Devon seems likely to keep buying additional shares.
The near term looks encouraging for Devon. Oil prices are rebounding after a decline over the summer. The company has made key acquisitions to boost its production capacity. It should be in a good position to generate strong free cash flow -- and keep the dividends flowing.
2. Easterly Government Properties
If you're looking for exceptionally dependable passive income, you'll definitely want to check out Easterly Government Properties (DEA 1.37%). The real estate investment trust (REIT) offers a dividend yield of 6.6%.
That dividend is as rock-solid as they come. Easterly focuses on leasing properties to mission-critical U.S. federal agencies. The company often reminds shareholders that it has "stable, recurring cash flows backed by the full faith and credit of the U.S. government."
On the other hand, Easterly's share price can be quite volatile. The REIT stock is down around 30% year to date. This decline is primarily the result of concerns about rising interest rates that will make it more costly for Easterly to finance expansion.
However, Easterly's long-term prospects remain attractive. The U.S. government is likely to continue shifting from owning properties to leasing. Easterly ranks as the second-largest player in the government real estate market. The company has the expertise and access to capital needed to be successful.
3. Medical Properties Trust
Medical Properties Trust (MPW 7.20%) (MPT) is another REIT that investors seeking passive income might really like. Its dividend yield currently stands at a whopping 10.5%. The company has increased its dividend for eight consecutive years.
Rising interest rates could be problematic for MPT. There are also worries about the financial strength of the REIT's biggest tenant -- Steward. Largely as a result of these issues, MPT stock has plunged more than 50% year to date.
This steep decline, though, gives MPT a really low valuation. Shares trade at under six times expected earnings. Wall Street seems to believe a comeback could be in store, with the consensus 12-month price target reflecting an upside potential of 59%.
The company's greatest risk is the potential of default on loans that it's made and the failure of key tenants to pay rent. But MPT has successfully navigated these risks in the past. The concerns about Steward could be overblown. In MPT's second-quarter conference call, CEO Ed Aldag pointed to several areas of improvement recently in Steward's financial position.
MPT continues to generate strong profits and free cash flow. Its balance sheet looks solid. And the hospital properties that the REIT owns tend to be important to the communities that they serve. MPT should remain a passive-income machine for years to come.
