Want to Gain $1,000 in Annual Dividend Income? Invest $11,900 in These 3 High-Yield Dividend Stocks. | The Motley Fool (2024)

If you're looking for ways to build up a passive income stream that can support your retirement plans, there are lots of options. Acquiring properties that you rent to others is a popular one, but acquiring rental properties often requires more capital than most investors are prepared to commit.

If you don't have enough cash to put a down payment on a duplex, or just don't want the hassle of property management, consider these dividend stocks. At recent prices, they offer an average yield of 8.4%.

About $11,900 spread evenly among these stocks is enough to secure $1,000 in annual dividend income. Moreover, there's a good chance they will be able to raise their dividend payments, and your income stream, for many years to come.

Altria Group

Altria Group (MO -0.37%) markets the Marlboro brand in the U.S., where it's been a market leader for decades. Slow but steady earnings growth from tobacco sales has allowed the company to raise its dividend payout 58 times over the past 54 years. At recent prices, it offers a huge 9.5% dividend yield.

The company reported cigarette shipments that declined 9.9% last year. Brand loyalty is strong enough that the company was able to raise prices on Marlboros and limit the losses. In 2023, smokable product revenue fell just 1.6%, net of excise taxes.

With additional sales of nonsmokable products, Altria reported revenue net of excise taxes that fell just 0.9% last year. By carefully controlling costs and repurchasing shares, the company was able to report adjusted earnings that rose 2.3% last year.

Altria probably isn't going to announce exciting dividend growth rates in the years ahead. With a huge dividend yield, though, it still has what it takes to produce market-beating gains over the long run.

Ares Capital

Ares Capital (ARCC 0.73%) is America's largest publicly traded business development company (BDC). Middle-market businesses generally have over $10 million in annual revenue, but they still can't get America's big banks to give them loans.

Starved for capital, midmarket businesses are willing to pay above-average interest rates. The average yield on this BDC's debt and other income-producing securities reached 12.4% as of Sept. 30.

Ares Capital is so well established that it sports an investment-grade credit rating that keeps its cost of capital lower than those of most of its peers. Recently, the BDC was able to borrow $1 billion at 5.875% through the sale of unsecured notes that mature in 2029.

At recent prices, shares of Ares Captial offer a big 9.5% dividend yield. Its payout isn't rising fast, but it's up by 20% over the past three years. With such a wide gap between its cost of capital and the interest rates midmarket businesses are willing to accept, investors can reasonably expect this BDC to maintain or raise its dividend payout in the years ahead.

AT&T

As one of three major telecom service providers in the U.S., investors can look forward to reliable earnings from AT&T (T 1.02%). Despite being a member of America's telecom oligopoly, AT&T shares offer a big 6.2% dividend yield at recent prices.

A large debt load has investors somewhat nervous about AT&T following the sale of its media assets. Now that it's strictly a telecom business again, investors can look forward to steadily rising cash flows from new mobile and broadband internet subscribers.

Mobility service revenue rose 4.4% last year, thanks to a successful 5G rollout, and this isn't its fastest-growing segment. In 2023, broadband revenue soared 8.1% year over year.

Broadband revenue is being driven by AT&T Fiber, which added 1.1 million new subscriptions last year. It was the sixth year in a row with more than a million new subscribers.

In 2023, AT&T reported free cash flow that rose 18% to $16.8 billion. The company needed less than 40% of the free cash flow it generated last year to meet its dividend commitment. With heaps of new broadband subscribers, there's a very good chance it can chip away at its debt load and raise its dividend payout significantly in the years ahead.