The stock market can be a phenomenal tool for achieving financial goals.
Folks with a multidecade time horizon may be willing to take on more risk by centering their portfolios around growth-focused companies. Conversely, those closer to retirement may be more interested in preserving capital and generating passive income.
Taking it a step further is a financial plan that generates a specific amount of money from dividends to offset a loss/decrease in income or supplement income in retirement. Folks looking for at least $1,000 in passive income per year could invest $30,000 into equal parts of ConocoPhillips (COP +0.11%), Cheniere Energy Partners (CQP 0.72%), and Starbucks (SBUX 0.10%).
Here's why all three dividend stocks stand out as quality buys now.
Image source: Getty Images.
Now's a great time to gas up on ConocoPhillips stock
Scott Levine (ConocoPhillips): With volatility roiling the energy market, many people have shied away from oil and gas stocks in favor of more stable investment opportunities. Taking the long view, however, investors will find that ConocoPhillips stock has demonstrated resilience.
As of June 20, the stock has provided a total return of over 6% while the price of oil benchmark West Texas Intermediate has plunged more than 34%. Between this, the stock's 3.4% forward yield, and its attractive valuation, investors have an excellent opportunity today to fuel their passive income streams with a leader in the oil patch.
Savvy investors know that high-yielding dividends are great, but they require some investigation to ensure that they're sustainable. ConocoPhillips stock seems to be on firm financial footing. Over the past five years, the stock has averaged a conservative 44.3% payout ratio. This fiscally responsible approach to returning capital to shareholders seems likely to continue. On its first quarter 2025 conference call, management noted that it has consistently paid out 40% to 45% of cash from operations to investors in the form of dividends in the past, and it expects to continue doing so.
And the company's projected free cash flow growth allows the dividend to grow in the years ahead. With its investments in Alaska and in liquid natural gas, ConocoPhillips expects to generate $6 billion in incremental free cash flow in 2029 compared to what it generates in 2025.
Changing hands at 5.5 times operating cash flow -- a discount to its five-year average multiple of 6.4 -- ConocoPhillips stock is attractively valued and currently represents a great passive income play.
NYSE: COP
Key Data Points
Exporting U.S. energy is a key aim of the current administration
Lee Samaha (Cheniere Energy Partners): Recent geopolitical events in the Middle East have underscored that the world is unstable, and much of the hydrocarbons needed to fuel it are in extremely sensitive regions.
This isn't the place to discuss the rights and wrongs of such matters, but it's indisputable that recent events have strengthened the argument that the U.S. needs energy independence. That's where Cheniere Energy Partners and its liquefied natural gas (LNG) terminals come in. While Cheniere (LNG 1.13%) aims to export LNG, the natural gas it cools to form LNG comes from the U.S. As such, Cheniere's expansion supports U.S. natural gas production.
Furthermore, its LNG exports help keep the global market supplied -- notably U.S. allies in places like Korea, India, and Europe, where Cheniere has major customers responsible for more than 10% of its current revenue each.
With a hydrocarbon-friendly administration in place in the U.S., and one that wants to take advantage of America's natural resources, the outlook for Cheniere is bright, and the sustainability of its dividend (currently yielding 5.8%) seems assured.
A balanced buy for long-term investors
Daniel Foelber (Starbucks): The beverage behemoth has been undergoing a major turnaround to return to meaningful growth. The latest plan, called "Back to Starbucks," aims to improve the Starbucks experience for employees and customers.
Starbucks' operating margins have been under pressure as customers have resisted years of price increases. And Starbucks is having trouble growing in key international markets like China.
The coffee giant isn't out of the woods yet, but the stock looks like a good value for passive income investors who believe in the power of the Starbucks brand and have the patience to buy and hold the stock for at least three to five years.
Starbucks has increased its dividend for 14 consecutive years and yields a solid 2.7% at the time of this writing. It has an attractive yield because its dividend has grown far faster than its stock price. Over the last decade, Starbucks' dividend is up 281% compared to a 56% gain in the stock.
As Starbucks matured, it transitioned from an exciting growth story introducing espresso drinks to untapped markets to a somewhat stodgy dividend-paying value stock. That's not a bad thing, it just means that the investment thesis has shifted. So investors should make sure they are choosing the stock for where the company is headed rather than where it has been.
As poor as Starbucks' results have been in recent years, the company still has a powerful brand, competitive advantages, and a loyal customer base fueled by its rewards program. The stock doesn't look cheap at first glance, but that's mainly because of management's ambitious (but costly) campaign to reduce customer wait times and make key operational changes to the business.
All told, Starbucks is a quality dividend stock that's worth a closer look now.
