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 (almost 5% in early 2026 compared to less than 1.2% 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 4.3% from 1973-2024, according to data from Ned Davis Research and Hartford Funds). Companies with higher dividend payout ratios (40% to 75%) and higher yields have outperformed the S&P 500 more often than companies with lower payout ratios and yields (60% to 70% from 1930 through 2024).

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-yielding payouts have lower risk profiles since they generate stable cash flows and have 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.

Best Income Stocks for Passive Income

By Matthew DiLallo – Updated Feb 20, 2026 at 8:17 PM EST | Fact-checked by Frank Bass

Key Points

Income stocks offer steady dividends, making them a reliable passive income source.
Income stocks tend to be less volatile than growth stocks, adding stability to investment portfolios.
Dividend growth in these stocks can lead to both passive income and stock price appreciation.

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, giving you a steady stream of cash simply for holding 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.

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 annually 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.

Top income stocks to consider

Ticker Information Table
Name and ticker	Market cap	Dividend yield	Industry
PepsiCo (NASDAQ:PEP)	$205.1 billion	3.79%	Beverages
Verizon Communications (NYSE:VZ)	$210.8 billion	5.47%	Diversified Telecommunication Services
Realty Income (NYSE:O)	$56.8 billion	5.30%	Retail REITs
Johnson & Johnson (NYSE:JNJ)	$567.2 billion	2.21%	Pharmaceuticals
NextEra Energy (NYSE:NEE)	$186.5 billion	2.60%	Electric Utilities

Data as of Mar 23, 2026. Showing 5 of 5 tickers.

1. PepsiCo

NASDAQ: PEP

PepsiCo

Today's Change

(0.59%) $0.89

Current Price

$150.93

Key Data Points

Market Cap

$205B

Day's Range

$150.04 - $152.25

52wk Range

$127.60 - $171.48

Volume

17K

Avg Vol

7.9M

Gross Margin

54.36%

Dividend Yield

3.79%

PepsiCo pays a well-above-average dividend. The beverage and snacking giant's dividend yield was around 3.5% in early 2026, nearly triple the S&P 500's dividend yield of less than 1.2%.

PepsiCo also has a terrific record of increasing its dividend. The company delivered its 54th consecutive annual dividend increase in early 2026. That kept it in the elite group of Dividend Kings, companies with 50 or more years of consecutive dividend increases.

The snacking and beverage behemoth should have no trouble continuing to provide investors with a rising stream of dividend income. The company's long-term goal is to grow its earnings per share at a high single-digit annual rate. With its earnings on the rise and a strong balance sheet, PepsiCo should have plenty of pop to continue pushing its payout higher.

2. Verizon

NYSE: VZ

Verizon Communications

Today's Change

(0.22%) $0.11

Current Price

$50.09

Key Data Points

Market Cap

$211B

Day's Range

$49.62 - $50.21

52wk Range

$38.39 - $51.66

Volume

108K

Avg Vol

31M

Gross Margin

45.79%

Dividend Yield

5.47%

Verizon Communications' (VZ +0.37%) 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 7% increase from 2025's level and will easily cover its expected annual dividend outlay of around $11.5 billion.

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

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3. Johnson & Johnson

NYSE: JNJ

Johnson & Johnson

Today's Change

(0.88%) $2.08

Current Price

$237.44

Key Data Points

Market Cap

$567B

Day's Range

$236.00 - $238.29

52wk Range

$141.50 - $251.71

Volume

15K

Avg Vol

8.6M

Gross Margin

67.97%

Dividend Yield

2.21%

Healthcare behemoth Johnson & Johnson (JNJ +0.78%) pays a very healthy dividend. It offered a dividend yield of more than 2% in early 2026, almost double the S&P 500's level. Meanwhile, it has 63 straight years of dividend increases.

The healthcare company is a financial fortress. It had an elite AAA bond rating (higher than the U.S. government). Johnson & Johnson ended 2025 with $20 billion in cash and $48 billion in debt. Meanwhile, it generated $20 billion in free cash flow in 2025 (more than enough to cover its $12.4 billion dividend payout).

Johnson & Johnson expects to grow its operational sales at a 5%-7% annual rate through 2030, driven in part by a target to grow oncology sales to $50 billion by that year. Meanwhile, its strong balance sheet will give it the flexibility to make acquisitions to further boost its growth (it bought Intra-Cellular Therapies for $14.6 billion and Halda Therapeutics for $3.1 billion in 2025). These factors put it in a strong position to continue increasing its dividend.

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4. Realty Income

NYSE: O

Realty Income

Today's Change

(0.11%) $0.07

Current Price

$61.02

Key Data Points

Market Cap

$57B

Day's Range

$60.86 - $61.74

52wk Range

$50.71 - $67.94

Volume

28K

Avg Vol

6.6M

Gross Margin

48.73%

Dividend Yield

5.30%

Realty Income (O +0.18%) has been a dependable income stock over the years. The real estate investment trust (REIT) delivered its 113th consecutive quarter of dividend increases in early 2026 and has boosted its payout 133 times since its initial public offering (IPO) in 1994. It has delivered more than 30 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 buying essential retail properties (think home improvement, grocery, and convenience stores), industrial real estate, and other properties (data centers and gaming). It triple-net leases (NNN) 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, which should allow the trust to continue increasing its attractive monthly dividend. Realty Income yielded around 5% in early 2026.

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5. NextEra Energy

NYSE: NEE

NextEra Energy

Today's Change

(1.17%) $1.05

Current Price

$90.55

Key Data Points

Market Cap

$186B

Day's Range

$90.35 - $91.11

52wk Range

$61.72 - $95.91

Volume

10K

Avg Vol

9.5M

Gross Margin

36.20%

Dividend Yield

2.60%

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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.

FAQ

Income stocks FAQ

About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers 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.