Passive income is a powerful tool for building long-term wealth and securing financial freedom. High-yield dividend stocks offer investors an effective way to generate stable cash flow without active management or daily involvement.
Success in dividend investing depends on identifying companies that offer attractive returns and have the financial strength to maintain and potentially grow their payouts over time. These rare finds can become cornerstone investments, providing reliable income streams for decades.
Two stocks currently shine on the high-yield landscape, each with yields above 5% and intriguing long-term prospects. Let’s take a look at why these dividend powers deserve more attention from income-oriented investors.
Verizon Communications (NYSE: VZ) makes a compelling case for income-oriented investors in light of its hefty 6.07% dividend yield. The telecom giant boasts an 18-year streak of consecutive dividend increases, and recently increased its quarterly payout to 67.75 cents per share, despite its 100% payout ratio.
Verizon’s strength comes from its dominant position in the US wireless market, which holds about 40% of the postpaid phone market share. This scale allows Verizon to generate industry-leading margins and returns on capital, which supports its generous dividend payments.
The company’s shares are up more than 18% year to date, likely thanks to investor rotation into select high-yield dividend stocks ahead of expected rate cuts. While Verizon faces intense competition and challenges in its fixed-line business, its extensive fiber network assets and 5G technology offer growth potential.
Verizon’s focus on wireless service revenue growth, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow generation reinforces its commitment to maintaining an attractive dividend. Because shares trade at just 9.5 times forward earnings, the stock also offers a significant margin of safety in the event of a market-wide pullback.
This combination of high returns, growth potential and attractive valuation makes Verizon an attractive passive income source.
Pfizer (NYSE:PFE) offers passive income investors a substantial dividend yield of 5.69%. The pharmaceutical powerhouse also has an extensive portfolio of more than 350 marketed drugs and 113 clinical trial candidates, with a global presence in more than 200 countries.
Still, recent challenges, mainly due to declining franchise sales due to COVID-19, have hit Pfizer stock hard. The drugmaker’s stock price is down more than 50% from its three-year peak, potentially creating an attractive value opportunity. Currently, Pfizer trades at just 9.6 times expected 2026 earnings.
