Investing in dividend-paying stocks is an easy way to make some passive income. Many companies currently offer the potential to collect a lucrative stream of dividend income due to their high yields. Investing $12,500 across the following five high-yielding stocks could enable you to make over $1,000 in passive dividend income next year:
|
Dividend Stock |
Investment |
Current Yield |
Annual Dividend Income |
|---|---|---|---|
|
Ares Capital (ARCC 2.27%) |
$2,500.00 |
9.5% |
$237.50 |
|
Energy Transfer (ET 1.01%) |
$2,500.00 |
8.2% |
$204.00 |
|
Starwood Capital (STWD 1.12%) |
$2,500.00 |
10.3% |
$257.50 |
|
UPS (UPS 2.89%) |
$2,500.00 |
6.5% |
$163.50 |
|
Verizon (VZ 0.10%) |
$2,500.00 |
6.8% |
$171.00 |
|
Total |
$12,500.00 |
8.3% |
$1,033.50 |
Data source: Google Finance and the author's calculations.
Here's a closer look at these big-time income stocks.
Image source: Verizon.
Ares Capital
Ares Capital is a business development company (BDC). It provides capital to private middle market companies (those with $100 million to $1 billion in annual revenue). It primarily makes senior secured loans (71% of its portfolio) to companies in less cyclical industries. It has invested $28.7 billion across 587 portfolio companies. Ares has an exceptional investment track record with a cumulative net realized loss of less than 0% since its inception.
The company's investment portfolio generates interest and dividend income. As a BDC, Ares Capital must distribute 90% of its income to investors via dividend payments. The company has delivered 16 years of a stable to increasing quarterly dividend. Ares Capital's defensively positioned portfolio and strong financial profile should enable it to continue sustaining and growing its dividend in 2026 and beyond.
NASDAQ: ARCC
Key Data Points
Energy Transfer
Energy Transfer is a master limited partnership (MLP), an entity that sends investors a Schedule K-1 Federal tax form for each year. The company operates a diversified energy midstream platform comprising pipelines, processing plants, export terminals, and other infrastructure. Stable fee-based sources (long-term contracts and regulated rate structures) supply about 90% of its annual earnings.
The MLP distributes around half its stable cash flow to investors, while retaining the rest to fund expansion projects. It's also in the strongest financial position in its history. That gives Energy Transfer plenty of flexibility to fund the multi-billion-dollar backlog of expansion projects it currently has underway, which should enter commercial service through the end of the decade. These projects help support the MLP's expectation of increasing its distribution by 3% to 5% annually.
Starwood Capital
Starwood Capital is a real estate investment trust (REIT). The company has diverse investments, including commercial mortgages, infrastructure-backed loans, and direct property investments. These investments produce interest and rental income for the REIT. Starwood's diversification strategy has enabled it to maintain its dividend for over a decade, despite the fluctuations in the real estate market.
NYSE: STWD
Key Data Points
The REIT has steadily diversified its portfolio over the years to enhance the stability of its income and the sustainability of its dividend. It most recently bought a $2.2 billion net lease platform. This portfolio currently comprises 467 properties secured by net leases with a 17-year weighted average lease term and 2.2% annual rent escalations. This net lease platform, which Starwood intends to grow, should provide it with durable and growing income to support its dividend.
UPS
UPS has struggled in recent years. Its share price is down more than 50% from its peak, causing its dividend yield to soar. High labor costs, shipping market challenges, tariffs, and a decision to reduce its reliance on top customer Amazon have weighed on its financial performance and share price.
The global logistics company hasn't produced enough cash to cover its dividend this year ($2.7 billion in free cash versus $4 billion in dividend payments). However, it's working to deliver $3.5 billion in cost savings by year-end. It also has a strong financial position (it expects to end the year with $5 billion in cash). That drives the company's belief that it can maintain its dividend through its current rough patch, as it has done every year since going public in 1999. UPS views its commitment to the dividend as one of its core principles and a hallmark of its financial strength.
NYSE: UPS
Key Data Points
Verizon
Verizon is a cash-producing machine. The mobile and broadband company generates substantial recurring revenue and cash flow as customers pay their cellphone and internet bills. It currently produces enough cash to cover its capital expenditures and dividend payments, with ample room to spare. That has enabled it to maintain a rock-solid balance sheet.
The company has invested heavily to expand its 5G and fiber networks to offer customers higher speeds. These investments should pay off in the coming years by enabling Verizon to grow its revenue and free cash flow. That should support continued dividend increases. Verizon has raised its payment for 19 straight years.
Lucrative income streams
Ares Capital, Energy Transfer, Starwood Capital, UPS, and Verizon pay some of the more lucrative dividends you'll find these days. Each company also has a solid record of paying stable or growing dividends, which is likely to continue in 2026 and beyond. That makes them ideal stocks to buy to generate a lot of passive income in the coming year.
