I would Let’s just say there are more ways to generate passive income than you can handle. However, that term may not be true, depending on how big your rod is and how committed you are to shaking it. However, there are many ways to generate passive income.
Buying dividend stocks is one of the best approaches. If you have a decent amount of money to invest and can find stocks with particularly juicy dividend yields (and the ability to maintain those dividends), you can potentially earn significant passive income. The good news is that such stocks are not hard to find. Investing $134,800 in these three high yielding stocks could give you $10,000 in reliable passive income in 2025.
Ares Capital(NASDAQ: ARCC) the largest is publicly traded business development company (BDC). As a BDC, Ares provides financing primarily to middle market companies with market capitalizations between $100 million and $1 billion. It manages approximately $464 billion in assets, more than half of which are first-lien securities.
BDCs must return at least 90% of their earnings to shareholders as dividends in order to be exempt from federal income tax, so their dividend yields are quite high. Ares Capital is no exception with its forward dividend yield of 8.72%. If you invested one-third of the initial $134,800 (about $44,933), you would receive almost $3,919 in passive income in 2025.
While there is always the risk that a particular company could cut its dividend, I think Ares Capital’s dividend is solid. CFO Scott Lem noted in the company’s third-quarter update: “Our conservative approach to investing and funding our balance sheet have allowed us to pay stable to growing regular quarterly dividends to our shareholders for more than 15 years.”
The traditional middle market represents a $3 trillion market opportunity. The addressable liquid credit market for companies with annual revenues greater than $1 billion adds an additional $2.4 trillion to Ares Capital’s total addressable market. With more companies turning to direct lending for its convenience and speed of execution, I expect Ares Capital’s business to continue to grow — and its dividends to continue to flow.
Enterprise Products Partners(NYSE: EPD) is among the largest mid-sized energy companies in the USA. It operates over 50,000 miles of pipelines that transport natural gas liquids (NGLs), crude oil, natural gas and petrochemical products. The company’s other midstream assets include 42 natural gas processing facilities, 26 fractionators and facilities capable of storing more than 300 million barrels of liquid hydrocarbons.
Investment in limited partnerships (LP)such as Enterprise Products Partners, comes with additional tax filing difficulties. However, I think the effort is worth it as Enterprise offers a forward distribution yield of 6.76%. One-third of your initial $134,800 would provide just over $3,037 in annual income.
I bet your real passive income in 2025 will be even higher. Why? Enterprise Products Partners has increased its distribution for 26 consecutive years. Chances are very good that the company will extend that streak this year.
Enterprise Products Partners’ business is recession-proof. Its income is not greatly affected by oil and gas price fluctuations. About 90% of its long-term contracts include inflation protection provisions. Unsurprisingly, Enterprise has been able to generate strong cash flow per unit in both good and bad times for the energy sector.
Most investors are probably already familiar Verizon Communications(NYSE: VZ). The company is a telecommunications giant that serves millions of consumers and businesses (including nearly everyone on the Fortune 500 list).
Verizon has been popular with income investors for years — and still is, with its ultra-high 6.79% dividend yield. If you invested the last one-third of your initial $134,800 in stocks, you should receive approximately $3,051 in annual income. That brings your total passive income for 2025 from these three stocks to just over $10,000.
I suspect that Verizon could increase that total, though. The company has increased its dividend for 18 consecutive years. My hunch is that in 2025 the number will rise to 19.
Could Verizon’s ongoing acquisition Frontier Communications adversely affect its ability to fund dividends? I don’t think so. Verizon expects the deal to be immediately accretive to its revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Before you buy shares in Ares Capital, consider the following:
The Motley Fool Stock Advisor a team of analysts has just identified what it believes to be 10 best stocks for investors to buy now… and Ares Capital was not one of them. Ten Stocks That Dimmed Could Produce Monster Returns in the Coming Years.
Think about when Nvidia made this list on April 15, 2005… if you invested $1000 at the time of our referral, you would have $842,611!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio construction guidance, regular updates from analysts, and two new stock picks each month. TheStock Advisorthe service has more than quadrupled return of the S&P 500 since 2002*.
Keith Speights holds positions at 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.
