The 15 Best Dividend Stocks for Lifetime Passive Income

Dividend stocks offer a path to steady passive income, but not all are created equal. The key to long-term success lies in dividend sustainability, not just high current yields.

The payout ratio serves as a critical tool for assessing sustainability. This metric, representing the percentage of earnings distributed as dividends, reveals a company’s ability to maintain and grow its dividends. A conservative ratio below 50% usually signals strength and room for growth, while ratios above 75% can indicate that a dividend is at risk.

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Context matters when evaluating pay rates. Pharmaceutical companies often show exceptionally high ratios due to their cyclical nature. Real estate investment trusts (REITs) must distribute 90% of their taxable income as dividends, naturally raising their rates.

Armed with this primer, the following 15 dividend stocks emerge as some of the best plays for passive income. Yields, payout ratios and other key factors signal the potential for long-term sustainable returns. Here’s an overview of these top dividend payers.

Dividend centers

Johnson & Johnson (JNJ 0.01%) and Coca cola (K.O 0.55%) they stand out because of decades of steady growth in dividend programs. J&J offers a yield of 3.07% and a payout ratio of 72.70%. The company’s diverse healthcare portfolio also offers stability and above-average growth potential.

Coca-Cola stock pays a yield of 2.7% with a payout ratio of 76.80%. Its iconic brand and global distribution network create a wide economic moat, an important buffer against potential dividend cuts.

Retail giants

Aim (TGT -0.51%) and Lowe’s (LOW 0.58%) represent strong retail dividend options. Target pays a decent yield of 2.89% with a conservative payout ratio of 45.50%. The company’s omnichannel strategy and exclusive brands drive customer loyalty.

Lowe’s, meanwhile, offers a yield of 1.72% and an extremely conservative payout ratio of 36.7%. Its strong position in the home improvement market provides consistent cash flow and ample opportunities for growth.

Consumer product leaders

PepsiCo (PEP 0.18%) and Costco (COST -1.75%) provides stability in the consumer goods sector. PepsiCo stock yields 3.19% with a payout ratio of 74.50%. Its diverse portfolio of snacks and beverages provides resilience during recessions and economic shocks.

Costco’s 0.52% yield and 26.30% payout ratio may seem low, but the company’s steady dividend growth and special dividends boost shareholder returns. In other words, Costco’s stock has outperformed the benchmark S&P 500 in the previous 10-year period (more on this below).

Pharmaceutical giants

AbbVie (ABBV 1.51%) and Pfizer (PFE 0.41%) illustrates the distinctive dividend landscape of the pharmaceutical industry. AbbVie’s 3.18% yield and 202% payout ratio reflect the post-Humira transition, with newer immunologic drugs gaining traction to support its substantial dividend.

Pfizer, offering a yield of 5.78% and a payout ratio of 443%, exemplifies the cyclical nature of the industry. Despite the current challenges, Pfizer’s history of dividend growth and shareholder engagement suggest that its high yield will persist through this lean period.

Innovators in financial services

Visa (V 1.28%) and S&P Global (SPGI 0.20%) represents financial services stocks with significant room for dividend growth. Visa’s 0.76% yield and 21.50% payout ratio reflect its focus on reinvesting for expansion in an era defined by a continued shift to digital payments.

S&P Global offers a yield of 0.71% and a payout ratio of 34.3%. The company is a leader in credit ratings, benchmarks and analysis. Because of its wide moat in most of these areas, S&P Global has been able to increase its payout for 51 consecutive years.

Dividend yield leaders

Altria (MO -0.08%) and AT&T (T 1.16%) stand out for their impressive yields. Altria boasts a yield of 7.99% and a payout ratio of 67.50%. Despite falling smoking rates, the tobacco giant has historically offset volume declines with price increases, suggesting dividend stability for now.

AT&T offers a yield of 5.07% with a payout ratio of 63.70%. Following a strategic restructuring, the telecommunications company consolidated its core business. While AT&T stock has risen this year, it remains attractively valued at 9.6 times forward earnings, which may mitigate economic headwinds.

T Total return level data by YCharts

Industrial and real estate options

Grainger (GWW -0.77%) and Real estate income (A 0.40%) stands out in the industrial and real estate arenas. Grainger’s 0.79% yield and 20.9% payout ratio reflect its focus on impressive growth in maintenance, repair and operations. Realty Income offers a yield of 5.04% with a payout ratio of 285.9%. Its triple net leasing model provides a stable income for shareholders.

International exposure

Philip Morris International (P.M -0.19%) brings international exposure to this dividend portfolio, offering a yield of 4.48% and a payout ratio of 92%. Its global range of tobacco and low-risk products offers steady growth prospects and stability for income-focused investors.

Despite the high payout ratio, Philip Morris has consistently increased its dividend annually since its 2008 spinoff, with an impressive compound annual growth rate of 7%. This track record suggests that the tobacco giant’s substantial dividend remains reliable for the foreseeable future.

Performance comparison

Over the past decade, many of these dividend stalwarts have outperformed the S&P 500. Visa, S&P Global and Costco have had particularly strong total returns:

COST Total Return Level data by YCharts

However, some high-yield options such as AT&T lagged the broader market, underscoring the importance of focusing on dividend growth potential rather than current yield.

Key recommendations

This diverse group of 15 dividend stocks offers investors a range of options for building a portfolio focused on lifetime passive income. By prioritizing sustainable payouts, consistent growth and strong competitive positions, these companies provide a solid foundation for long-term dividend wealth accumulation.