I would Suppose there are more ways to generate passive income than you can shake a stick at. However, that expression may not be true depending on how big your stick is and how committed you are to shaking it. Still, there are many ways to earn passive income.
Buying dividend stocks is one of the best approaches. If you have a decent amount of cash to invest and can find stocks with particularly juicy dividend yields (and the ability to keep those dividends coming), you can potentially rake in significant passive income. The good news is that it is not difficult to find such stocks. Investing $134,800 in these three high-yield dividend stocks could net you $10,000 in reliable passive income by 2025.
Ares Capital (NASDAQ: ARCC) is the largest listed company business development company (BDC). As a BDC, Ares primarily provides financing to mid-market companies with market capitalizations between $100 million and $1 billion. It has roughly $464 billion in assets under management, and more than half of its assets are first-lien senior secured notes.
BDCs must return at least 90% of their earnings to shareholders as dividends to be exempt from federal income taxes, so their dividend yields are typically quite high. Ares Capital is no exception with a future dividend yield of 8.72%. If you were to invest a third of the initial €134,800 (approximately €44,933), you would receive a passive income of almost €3,919 in 2025.
While there’s always a risk that a given company could cut its dividend, I think Ares Capital’s dividend is solid. CFO Scott Lem noted in the company’s Q3 update: “Our conservative approach to investing and financing our balance sheet has enabled us to pay a stable to growing regular quarterly dividend to our shareholders for more than 15 years.”
The traditional middle market offers a $3 trillion market opportunity. The addressable market for liquid credits for companies with annual revenues of more than $1 billion adds another $2.4 trillion to Ares Capital’s total addressable market. As more companies turn to direct lending for its ease and speed of execution, I expect Ares Capital’s business to continue to grow – and the dividends to continue to flow.
Partners for business products (NYSE:EPD) is among the largest midstream energy companies in the US. It operates more than 50,000 miles of pipelines that transport natural gas liquids (NGLs), crude oil, natural gas and petrochemicals. The company’s other midstream assets include 42 natural gas processing trains, 26 fractionators and facilities capable of storing more than 300 million barrels of liquid hydrocarbons.