The S&P 500 pays a dividend yield of roughly 1.1%, near the lowest in the index's history. Put $100,000 into the index and it hands back about $1,100 a year. That is why investors who want their portfolio to pay them have to look outside the index. The best stocks for passive income right now are Chevron, AT&T, Pfizer, Altria, Enterprise Products Partners, General Mills, and Ares Capital. We screened the highest-yielding US-listed companies and kept seven where the cash coming in the door still covers the check going out.
How We Picked These Stocks
Hundreds of US-listed companies yield more than 4%. High yield on its own proves nothing, because a yield climbs when a share price falls, and a falling price is often the market telling you a dividend is about to be cut. We filtered for four things: a payout the company covers out of its own cash flow, a business that has funded the dividend through at least one downturn, a market cap above $10 billion, and a stated commitment to keep paying. We excluded companies whose payout exceeds their cash generation with no plan to close the gap. The result is seven companies that pay from seven different income engines, so one bad industry cannot take out the whole paycheck.
Chevron (NYSE: CVX)
Why it made the list: Chevron has raised its dividend for 39 consecutive years, through oil crashes in 2015, 2020, and every scare in between. That streak is the whole argument. An oil major that kept raising the payout when crude went negative in 2020 has proven what it will protect first.
The bull case: The Hess acquisition and the Tengiz expansion are set to add billions in free cash flow, the money left after the company pays for its own drilling. Permian production has stayed above 1 million barrels of oil equivalent per day for three straight quarters while capital spending came down. Management raised the quarterly dividend 4% in January. We compared the two US majors head to head in our look at whether Exxon or Chevron has the safer dividend.
The risk: Oil prices set the cash flow, and crude has traded as low as the mid-$50s a barrel over the past year. A long stretch down there would force spending cuts before it forced a dividend cut, but it would stall the raises.
Key number: 39 straight years of dividend increases.
AT&T (NYSE: T)
Why it made the list: AT&T cut its dividend in 2022 and has held it flat at $1.11 a share since. That sounds like a knock, but a flat dividend backed by enormous cash flow is safer than a rising one that is stretched. The company guides to more than $18 billion in free cash flow this year against roughly $8 billion in dividend payments.
The bull case: Fiber is the growth engine. AT&T is adding fiber customers at a record pace, the Lumen deal brings another 1.1 million of them, and the company is targeting 60 million locations passed by 2030. Fiber customers pay more and leave less often than copper or wireless-only customers. Our comparison of Verizon and AT&T breaks down which telecom dividend holds up better.
The risk: Wireless is a three-way price war with Verizon and T-Mobile, and the stock trades well below its 12-month high because the market is not convinced the fiber build pays off on schedule.
Key number: Free cash flow covers the dividend more than twice over.
Pfizer (NYSE: PFE)
Why it made the list: Pfizer carries one of the largest yields in the S&P 500, and the payout consumes roughly 60% of the adjusted earnings the company guides to this year. Adjusted earnings strip out one-time charges to show what the ongoing business earns. Management has repeated that the dividend is the first call on cash.
The bull case: The Metsera acquisition bought Pfizer a real seat in obesity drugs, including an ultra-long-acting GLP-1 with positive mid-stage data. The company has around 20 pivotal trials starting this year, about half of them in obesity. If even one lands, the growth story stops being about cost cuts.
The risk: A wave of patent expirations is coming, and on a cash basis the payout eats nearly all of what the company generates today. That gap has to close. We laid out both sides in our Pfizer bull and bear case.
Key number: Around 20 pivotal trial starts planned this year.
Altria (NYSE: MO)
Why it made the list: Altria has raised its dividend 60 times in 56 years, most recently by 3.9%, and it targets paying out about 80% of adjusted earnings. The Marlboro business shrinks in volume every year and raises prices enough to grow profit anyway. That trade has worked for two decades.
The bull case: Management guides to adjusted earnings growth of 2.5% to 5.5% this year, which is enough to keep the raises coming. The smoke-free side is finally contributing, with on! nicotine pouches taking share and the NJOY vape carrying FDA marketing orders that most competitors do not have.
The risk: Cigarette volumes keep falling, and illicit flavored vapes continue to take smokers Altria wanted for its own products. We walked through the math holding the streak together in our breakdown of Altria's payout history.
Key number: 60 dividend increases over the past 56 years.
Enterprise Products Partners (NYSE: EPD)
Why it made the list: Enterprise Products Partners has raised its distribution for 27 consecutive years, including through 2020, when much of the pipeline industry cut. Last quarter its distributable cash flow covered the distribution 1.8 times. That is one of the widest cushions in the income market.
The bull case: Enterprise moves natural gas liquids, crude, and petrochemicals through its own pipelines and export terminals, and it gets paid by volume rather than by the price of the commodity. Record volumes and rising Gulf Coast exports feed straight into cash flow. New power demand from data centers adds another pull on natural gas.
The risk: Enterprise is a master limited partnership, so it sends holders a K-1 tax form instead of a 1099, which complicates tax filing and makes it a poor fit inside an IRA. Distribution growth has also slowed to a low-single-digit pace.
Key number: Cash flow covered the distribution 1.8 times last quarter.
General Mills (NYSE: GIS)
Why it made the list: General Mills has paid a dividend without interruption for 127 years. The yield is near 7% only because the share price has fallen by roughly a third, not because the company raised the payout. Free cash flow per share this fiscal year is guided well above the dividend per share.
The bull case: Cheerios, Blue Buffalo, and Pillsbury are the kind of brands people keep buying when budgets tighten. The company beat profit estimates in its most recent quarter and the stock jumped 7% on the news, a sign of how low expectations had fallen.
The risk: Sales volumes are still shrinking as shoppers trade down to store brands and GLP-1 drugs trim grocery baskets. Management guided this fiscal year to an organic sales decline and a double-digit drop in adjusted earnings.
Key number: 127 consecutive years of dividend payments.
Ares Capital (NASDAQ: ARCC)
Why it made the list: Ares Capital is the largest publicly traded business development company, or BDC, a firm that lends to mid-sized private businesses and must pass at least 90% of its income to shareholders. It pays the highest yield on this list, and last quarter it earned $0.55 per share of net investment income against a $0.48 dividend.
The bull case: Nearly all of the portfolio is floating-rate senior loans, so Ares collects more interest while rates stay high and sits at the top of the repayment line if a borrower fails. It has paid a stable or rising dividend for well over a decade, including through 2020.
The risk: This is credit risk in a stock wrapper. If the economy turns and private borrowers start defaulting, the loan book takes losses and the dividend has less room. The shares trade below their 12-month high for exactly that reason.
Key number: $0.55 per share earned against a $0.48 quarterly dividend.
Where Passive Income Comes From Right Now
The 10-year Treasury has been paying more than 4%, which sets the bar. Any stock asking you to take equity risk has to beat that bond, and every name here does, several by a wide margin. That gap exists because income stocks fell out of favor while money chased artificial intelligence. Cheap prices on unchanged dividends is how yields got this high.
The seven names split into two groups. Chevron, AT&T, and Enterprise Products own physical infrastructure and get paid for using it, so their cash flow is tied to volumes and contracts more than to consumer whims. Pfizer, Altria, and General Mills sell products into markets that are flat or shrinking, and they defend the dividend with pricing, cost cuts, and new categories. Ares Capital sits apart, collecting interest on loans instead of selling anything.
Owning a mix matters more here than picking a winner. A single dividend cut in a seven-stock income portfolio costs you a seventh of the paycheck, not the whole thing. If you would rather own dozens of payers at once, our guides to the best dividend stocks and the best dividend ETFs cover the funds and the blue-chip compounders that do that work for you.
What to watch:
- Second-quarter results: Coverage is the number that matters. Watch whether Ares Capital's net investment income still exceeds its dividend and whether General Mills stabilizes volumes.
- Rate direction: Falling rates would lift these share prices and cut what Ares Capital earns on its floating-rate loans at the same time.
- Pfizer's obesity data: Readouts from the Metsera pipeline decide whether the yield is a bridge to growth or a consolation prize.
Bottom Line
This list is for investors who want the portfolio to write them a check rather than just grow. Chevron, AT&T, and Enterprise Products are the sturdier income; Pfizer, Altria, and General Mills pay more to compensate for shrinking end markets; Ares Capital pays the most and carries the most credit risk. Spread the money across the group rather than reaching for the biggest number. For real estate income, see our guide to the best REITs for income, and for a lower-yield, faster-growing approach, our best retirement stocks guide covers it.
Frequently Asked Questions
What are the best stocks for passive income?
The best stocks for passive income pair a high yield with cash flow that covers it. Strong current picks include Chevron and Enterprise Products Partners for infrastructure-backed income, AT&T for free cash flow that covers the dividend twice over, Altria and General Mills for decades-long payment records, Pfizer for one of the largest yields in the S&P 500, and Ares Capital for the highest yield of the group.
How much money do you need to live off dividends?
It depends entirely on the yield and your spending. A portfolio yielding 5% pays $50,000 a year on $1 million. At the S&P 500's roughly 1.1% yield, generating the same $50,000 would take about $4.5 million. That gap is why income investors buy individual high-yield stocks rather than the index.
Are high-yield dividend stocks safe?
Some are and some are not, and the yield alone will not tell you which. A yield rises when a share price falls, so the highest yields often flag a business in trouble. The test is coverage: compare the dividend per share to the free cash flow or net investment income per share. Ares Capital earned $0.55 last quarter against a $0.48 dividend, which is covered. A company paying out more than it earns for several years running is not.
What is a BDC and why do they yield so much?
A business development company, or BDC, lends money to mid-sized private businesses that are too small for the bond market. By law a BDC must distribute at least 90% of its taxable income to shareholders, which is why yields near 10% are common. The trade is credit risk: if borrowers default, the income falls.
Do MLPs like Enterprise Products belong in an IRA?
Usually not. Master limited partnerships send a K-1 tax form and can generate unrelated business taxable income, which may create a tax bill inside an IRA that otherwise would not exist. Most investors hold MLPs in a taxable brokerage account and keep ordinary dividend stocks in retirement accounts.
