Let your money work for you. You’ve probably heard that said multiple times over the years, but it’s still good advice.
One of the best ways to put your money to work is through dividend stocks. Some can make your money work especially hard for you. Investing $100,000 in these seven high-yield dividend stocks could generate over $7,000 in annual passive income.
1. Ares Capital
Ares Capital (NASDAQ: ARCC) is a leading business development company (BDC) that provides financing to middle-market businesses. Its forward dividend yield stands at nearly 9.2%. If you invested one-seventh of an initial $100,000 in the stock, it would provide an income of over $1,300 per year.
Even better, you could also get some nice gains from the stock. Since its initial public offering in October 2004, Ares Capital has generated a cumulative total return that is more than 65% higher than the S&P 500‘s total return.
2. Energy Transfer
Take another one-seventh of your initial investment and buy shares of Energy Transfer (NYSE: ET). Technically, you’ll buy units instead of shares since the midstream energy company is organized as a limited partnership (LP). With a yield of over 7.9%, this investment should generate annual passive income of over $1,130.
Your income is also likely to increase over time. Energy Transfer expects to grow its distribution by 3% to 5% annually.
3. Enterprise Products Partners
Enterprise Products Partners (NYSE: EPD) has a lot in common with Energy Transfer. It, too, is a midstream energy company organized as an LP and offers a juicy distribution. Its yield of over 7.3% will give you in the ballpark of $1,050 in yearly income.
Investors seeking passive income have even more to like with Enterprise Products Partners. The company has increased its distribution for 25 consecutive years, with a compound annual growth rate of around 7%.
4. Enbridge
I don’t want to sound like a broken record, but there’s another midstream stock that’s a great income generator. Enbridge (NYSE: ENB) pays a dividend yield of nearly 7.1%. With this one, you could pocket over $1,010 in annual passive income.
If you like Enterprise Products Partners’ distribution track record, you’ll probably love Enbridge. The company has increased its dividend for an impressive 29 consecutive years.
5. Verizon Communications
Verizon Communications (NYSE: VZ) has been a favorite for income investors for years. It still is, with the telecommunications giant’s dividend yield topping 6.5%. One-seventh of your $100,000 would generate an annual income of around $930 with Verizon.
That amount could be higher in the future. Verizon has increased its dividend for 17 years in a row, the longest streak of dividend hikes in the U.S. telecommunications industry.
6. Brookfield Renewable
There are two Brookfield Renewable (NYSE: BEP) (NYSE: BEPC) stocks. The LP, which trades under the BEP ticker, offers a distribution yield of over 5.8%. The corporate entity trades under the BEPC ticker and has a dividend yield of over 5.1%. If you invested an equal portion of your initial $100,000 in the LP, you should receive an annual passive income of over $830.
Brookfield Renewable expects to increase its distribution by 5% to 9% each year. With the demand for renewable energy growing, the stock should also provide solid long-term gains.
7. Pfizer
Pfizer (NYSE: PFE) isn’t as successful as it was at the height of the COVID-19 pandemic. However, the big pharmaceutical company remains a great choice for income investors. Pfizer’s forward dividend yield stands at 5.5%. Investing the remaining portion of your $100,000 would add another $785 in dividend income, bringing our total to over $7,000.
The drugmaker’s management is committed to maintaining and growing the dividend over time. Pfizer could also deliver solid share price gains, with new products generating revenue and earnings growth.
Two cautionary notes
Some of these companies could be forced to cut their dividends. I don’t anticipate any of them will do so anytime soon, but investors should recognize this possibility.
Importantly, these seven stocks don’t offer much diversification (especially with three midstream energy companies on the list). This overexposure to one sector increases the risk of losses that could outweigh any income generated.
Should you invest $1,000 in Ares Capital right now?
Before you buy stock in Ares Capital, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Ares Capital wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $657,306!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 29, 2024
Keith Speights has positions in Ares Capital, Brookfield Renewable, Brookfield Renewable Partners, Enbridge, Energy Transfer, Enterprise Products Partners, Pfizer, and Verizon Communications. The Motley Fool has positions in and recommends Brookfield Renewable, Enbridge, and Pfizer. The Motley Fool recommends Brookfield Renewable Partners, Enterprise Products Partners, and Verizon Communications. The Motley Fool has a disclosure policy.
Investing $100,000 in These 7 High-Yield Dividend Stocks Could Generate Over $7,000 in Annual Passive Income was originally published by The Motley Fool
