I would say there are more ways to generate passive income than you can shake a stick at. However, that expression might not be true, depending on how big your stick is and how committed you are to shaking it. Nonetheless, there are lots of ways to make passive income.
Buying dividend stocks is one of the best approaches. If you have a tidy amount of cash to invest and can find stocks with especially juicy dividend yields (and the ability to keep those dividends coming), you can potentially rake in significant passive income. The good news is that it’s not hard to find such stocks. Investing $134,800 in these three high-yield dividend stocks could make you $10,000 in reliable passive income in 2025.
1. Ares Capital
Ares Capital (ARCC -0.23%) is the largest publicly traded business development company (BDC). As a BDC, Ares provides financing primarily to middle-market businesses with market caps between $100 million and $1 billion. It has roughly $464 billion in assets under management, and over half of its assets are first-lien senior secured notes.
BDCs must return at least 90% of their earnings to shareholders as dividends to be exempt from federal income taxes, so their dividend yields tend to be quite high. Ares Capital is no exception with its forward dividend yield of 8.72%. If you invested one-third of an initial $134,800 (around $44,933), you would receive passive income of nearly $3,919 in 2025.
While there’s always a risk that a given company could cut its dividend, I think Ares Capital’s dividend is solid. CFO Scott Lem pointed out in the company’s Q3 update, “Our conservative approach to investing and funding our balance sheet have enabled us to pay a stable to growing regular quarterly dividend for our shareholders for over 15 years.”
The traditional middle market presents a $3 trillion market opportunity. The addressable liquid credit market for companies with annual revenue of more than $1 billion adds another $2.4 trillion to Ares Capital’s total addressable market. With more companies turning to direct lending because of its convenience and speed of execution, I expect Ares Capital’s business will continue to grow — and its dividends will continue to flow.
2. Enterprise Products Partners
Enterprise Products Partners (EPD 0.51%) ranks among the biggest midstream energy companies in the U.S. It operates over 50,000 miles of pipeline that transport natural gas liquids (NGLs), crude oil, natural gas, and petrochemicals. The company’s other midstream assets include 42 natural gas processing trains, 26 fractionators, and facilities that can store over 300 million barrels of liquid hydrocarbons.
Investing in limited partnerships (LPs), such as Enterprise Products Partners, comes with some extra tax filing hassles. However, I think the trouble is worth it, as Enterprise offers a forward distribution yield of 6.76%. One-third of your initial $134,800 would provide a little over $3,037 in annual income.
I’ll bet that your actual passive income in 2025 will be even higher. Why? Enterprise Products Partners has increased its distribution for 26 consecutive years. The chances look very good that the company will extend that streak this year.
Enterprise Products Partners’ business is recession-resistant. Its revenue isn’t impacted much by fluctuations in oil and gas prices. Around 90% of its long-term contracts include inflation-protection provisions. Unsurprisingly, Enterprise has been able to generate strong cash flow per unit during both good times and bad times for the energy sector.
3. Verizon Communications
Most investors are probably already familiar with Verizon Communications (VZ 0.98%). The company is a telecommunications giant serving millions of consumers and businesses (including nearly all of the Fortune 500).
Verizon has been popular with income investors for years — and still is, with its ultra-high forward dividend yield of 6.79%. If you invested the final one-third of an initial $134,800 in the stock, you should receive roughly $3,051 in annual income. That brings your total passive income for 2025 with these three stocks to a little over $10,000.
I suspect Verizon could make that total somewhat higher, though. The company has increased its dividend for 18 consecutive years. My hunch is that 2025 will up the count to 19.
Could Verizon’s pending acquisition of Frontier Communications negatively impact its ability to fund the dividend? I don’t think so. Verizon expects the deal will immediately boost its revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Keith Speights has positions in Ares Capital, Enterprise Products Partners, and Verizon Communications. The Motley Fool recommends Enterprise Products Partners and Verizon Communications. The Motley Fool has a disclosure policy.
