Investing a grand could potentially yield approximately $65 in passive income annually from these two high-yielding dividend stocks by 2025.
Investing a grand could potentially yield approximately $65 in passive income annually from these two high-yielding dividend stocks by 2025.
Purchasing high-yield dividend shares in 2025 could be an excellent strategy for producing passive income. The recent halt in the Federal Reserve's interest rate reduction pace has resulted in a decrease in value for numerous higher-yielding stocks, leading to even more lucrative dividend yields.
For instance, at present, Enbridge (ENB, 0.05%) and W. P. Carey (WPC, -0.58%) offer dividend yields of around 6.4%, an increase due to a decrease in stock prices. This is significantly higher than the roughly 1.2% dividend yield of the S&P 500 (^GSPC, -1.11%). A $1,000 investment split between these considerably yielding stocks could generate roughly $65 in dividend income the following year.
Let's delve into the reasons these stocks rank as appealing income options, aside from the elevated dividend yields.
A finely-tuned income-generating engine
Enbridge has boasted a remarkable history of consistent dividend payments for almost 70 years. In fact, 2025 marks its 30th consecutive increase in dividend payout.
The organization's roughly 6.4% dividend yield rests on a robust foundation. Enbridge operates a low-risk business model responsible for generating highly dependable cash flow. Over 98% of its earnings stem from cost-of-service or contracted assets supported by credible clients, boasting more than 95% investment-grade credit ratings. Such consistent cash flow ensures that Enbridge remains on track to achieve its financial goals for the 19th consecutive year.
Enbridge is particularly financially conservative, with a payout ratio ranging between 60% and 70% of its stable cash flow. This substantial cushion allows the company to allocate considerable excess cash for expansion projects. Enbridge also boasts an investment-grade credit rating, with its leverage ratio trending towards the lower end of its target range of 4.5 to 5.0 times.
Enbridge's robust financial profile grants it access to billions of dollars in annual investment capacity. This arsenal allows the company to tackle an extensive backlog of organic expansion projects and seize strategic acquisition opportunities as they arise.
Enbridge anticipates that these determining factors will inflate its cash flow per share by approximately 3% annually through 2026. From then on, this growth rate is projected to surpass 5% annually. This steady increase in cash flow should empower Enbridge to carry on enhancing its dividend, ensuring continued income growth moving forward.
Crafting an even more durable dividend stock
W. P. Carey halted its streak of annual dividend increases for the first time last year, but it resumed its growth pattern following a strategic decision to depart from the struggling office sector. As a result, the diversified real estate investment trust (REIT) now boasts a dividend payout ratio within a 70% to 75% target range, as well as a lower leverage ratio (currently 5.4x), positioning the organization at the lower end of its mid-to-high 5x target range. This enhanced financial flexibility empowers W. P. Carey to purchase income-generating commercial properties exhibiting improved long-term rental growth prospects.
In 2024, W. P. Carey aims to acquire between $1.25 billion and $1.75 billion in properties. Most of these acquisitions focus on industrial properties connected to long-term net leases that escalate rents either at an annual fixed rate or in tandem with inflation. By doing so, the REIT is poised to benefit from a steadily increasing stream of stable rental income from now on.
W. P. Carey enjoys ample fiscal flexibility to continue making new property acquisitions in the future. The additions to its portfolio, along with rental growth from existing properties, should raise its cash flow per share the following year. This positive impact on cash flow should enable the REIT to increase its dividend payout once more. The company has already demonstrated its commitment to rebuilding its dividend by boosting it in all quarters since its reset in late 2023.
High-caliber income stocks
Enbridge and W. P. Carey boast assets generating highly predictable cash flow. Both organizations carefully distribute a significant portion of their income as dividends, retaining a portion of their income to expand their respective portfolios. These characteristics ensure a solid foundation for steadily and progressively paying dividends in the future, making them outstanding income stock choices as we gear up for the new year.
Given the current market conditions and the potential for lucrative dividend yields, investing in stocks like Enbridge and W. P. Carey could be an effective strategy for individuals seeking finance growth. Enbridge, with its consistent dividend history and robust financial profile, has the potential to increase its dividend payout annually, while W. P. Carey, after making strategic decisions, aims to enhance its financial flexibility and acquire income-generating properties, ultimately leading to an increase in its dividend.