Want $1,000 of Annual Passive Income? Invest $15,000 Into These 3 Top Dividend Stocks

Higher interest rates have weighed on the value of dividend-paying stocks. That has pushed up their dividend yields, allowing investors to generate a lot more passive investment income.

For example, a $15,000 investment spread equally across leading dividend stocks Kinder Morgan (KMI -0.64%), Verizon (VZ 1.17%), and W. P. Carey (WPC -1.70%) could generate more than $1,000 of annual dividend income. Here's what makes them such great options for income-seeking investors.

Very attractive payouts

Verizon, Kinder Morgan, and W. P. Carey currently offer high dividend yields due in part to a sell-off in their stock prices (they're all down more than 10% from their 52-week high). Those higher yields enable these stocks to generate more dividend income per dollar invested. Here's a look at how much income a $5,000 investment in each of these stocks would produce:

Data sources: Google Finance and author's calculations.

In total, $15,000 divided among those three stocks would produce $1,014 in annual dividends. To put their income production capacity into perspective, the current dividend yield of the S&P 500 is 1.56%; at that rate, $15,000 invested in an S&P 500 index fund would only produce about $234 of annual dividend income.

High-quality, high-yield stocks

A high dividend yield isn't worth much if the company behind the payout can't sustain it over the long term. Dividend durability makes Verizon, W. P. Carey, and Kinder Morgan stand out. They all pay well-supported dividends. Even better, the trio has dependable track records of increasing their already high-yielding dividends, which should continue.

We'll start at the top with Verizon. The telecom giant has produced $38.6 billion of cash flow from operations over the last 12 months. That covered its capital spending ($23.3 billion) and dividend outlay ($10.8 billion) with room to spare ($4.6 billion). Meanwhile, post-dividend free cash flow is on track to more than double over the next year due to an expected $5 billion decline in capital spending. That will enable Verizon to strengthen its already solid balance sheet and continue increasing the dividend. The company delivered its 16th consecutive annual dividend increase last year, the longest current dividend growth streak in the U.S. telecom sector.

Kinder Morgan also generates plenty of cash to cover its dividend and growth in capital spending. The natural gas pipeline giant expects to produce $5.7 billion in cash flow from operations this year, which will cover its capital expenses ($2.8 billion) and dividend payments ($2.5 billion) with room to spare ($336 million). That will give it excess cash to repurchase shares and strengthen its already solid balance sheet. Kinder Morgan is on track to end the year with a leverage ratio of 4, well below its target of 4.5. Its balance-sheet flexibility and expansion-related spending will enable it to continue increasing its dividend; the company notched its sixth straight year of increasing the dividend in 2023.

W. P. Carey produces very stable cash flow. The real estate investment trust (REIT) has a diversified portfolio of operationally critical properties leased to high-quality tenants. It utilizes triple net leases (NNN), which generate stable cash flow that rises each year due to contractual rental-rate escalation clauses (more than half link rents to the inflation rate). The company pays out less than 80% of its stable rental income in dividends. That gives it a cushion while allowing it to retain some cash to acquire additional income-producing real estate. W. P. Carey also has a strong investment-grade balance sheet to help fund new investments. The company's growing rental income and portfolio have enabled it to increase its dividend for 24 straight years.

Excellent income stocks

Verizon, Kinder Morgan, and W. P. Carey pay high-yielding dividends that they back with steady cash flow and strong financial profiles. That gives them the financial flexibility to continue expanding their operations while increasing their dividends. Those factors make them great stocks to buy for those seeking to start generating lots of passive income.