2 high yielding dividend stocks that can provide a lifetime of passive income

Passive income is a powerful tool for building long-term wealth and securing financial freedom. High-yielding dividend stocks offer investors an efficient way to generate steady cash flow without active management or day-to-day involvement.

Dividend investing success depends on identifying companies that offer attractive yields and that have the financial strength to maintain and possibly increase their payouts over time. These rare finds can become cornerstone investments, providing reliable income streams for decades.

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Two stocks currently shine in the high-yield landscape, each offering returns of more than 5% with interesting long-term prospects. Let’s examine why these dividend powerhouses deserve closer attention from income-focused investors.

Verizon: A telecom titan with a juicy return

Verizon Communications (See -0.25%) makes a compelling case for income-focused investors given its consistent dividend yield of 6.07%. The telecom giant boasts an 18-year streak of consecutive dividend increases, recently raising its quarterly payout to 67.75 cents per share despite its 100% payout ratio.

Verizon’s power comes from its dominant position in the US wireless market, controlling about 40% of the postpaid phone market share. This scale enables Verizon to generate industry-leading margins and returns on equity, supporting generous dividend payouts.

The company’s shares are up more than 18% year to date, likely benefiting from investors’ rotation into select high-yielding dividend stocks ahead of anticipated interest rate cuts. While Verizon faces stiff competition and challenges in its landline business, its extensive fiber network assets and 5G technology offer potential for growth.

Verizon’s focus on wireless revenue growth, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and free cash flow generation reinforce its commitment to maintaining an attractive dividend. With the stock trading at just 9.5 times forward earnings, the stock also offers a substantial margin of safety in the event of a market-wide pullback.

This mix of high yield, growth potential and attractive valuation makes Verizon an attractive passive income play.

Pfizer: A pharmaceutical giant with an attractive yield

Pfizer (PFE -1.93%) offers passive income investors a substantial dividend yield of 5.69%. The pharmaceutical powerhouse also has a vast portfolio of over 350 marketed drugs and 113 clinical trial candidates with a global footprint spanning over 200 countries.

However, recent challenges, mainly stemming from the COVID-19 franchise sales slump, have hit Pfizer stock hard. The drugmaker’s share price is down more than 50% from its three-year peak, potentially creating an attractive value opportunity. Pfizer currently trades at just 9.6 times its estimated 2026 earnings.

While Pfizer’s 15-year streak of consecutive dividend increases is impressive, the current payout ratio of 436% raises beauty in terms of sustainability. Management has addressed the issue head-on, reaffirming its commitment to a top dividend and implementing a $4 billion cost-savings initiative to strengthen its balance sheet during the post-COVID transition.

Looking ahead, Pfizer’s future depends heavily on the fate of its clinical pipeline, particularly its slate of potential blockbuster cancer treatments. Success in this high-growth market segment could significantly boost the company’s financial outlook and help bring its payout ratio closer to its historical average of 50%.

Pfizer’s status as an economically insensitive stock, along with its high yield and promising pipeline, make it an intriguing option for those looking for consistent income and long-term portfolio stability. Furthermore, the drug manufacturer’s base valuation should provide a significant margin of safety in the event of a market-wide correction.

Overall, Pfizer is considered a top candidate for a long-term oriented passive income portfolio.