Want to earn $1,000 a year in dividend income? Invest $11,900 in these three high-dividend stocks.

If you’re looking for a way to build a passive income stream that can support your retirement planning, there are plenty of options. Although acquiring real estate to rent to others is popular, acquiring rental properties often requires more capital than many investors have available.

If you don’t have enough cash for a down payment on a duplex, or just don’t want the hassle of property management, consider these dividend stocks. At recent prices, the average yield is 8.4%.

Spreading about $11,900 evenly across these stocks is enough to secure $1,000 in annual dividend income. Additionally, there’s a good chance they can increase dividend payments and your income stream for years to come.

altria group

altria group (NYSE:MO) sells the Marlboro brand in the United States and has been the market leader for decades. Slow but steady revenue growth from tobacco sales has allowed the company to increase its dividend 58 times over the past 54 years. At recent prices, it offers a huge dividend yield of 9.5%.

The company reported a 9.9% decline in cigarette shipments last year. Brand loyalty was strong enough that the company was able to raise the price of Marlboro and limit its losses. Revenue from smokable products in 2023 decreased by only 1.6% excluding excise tax.

Due to additional sales of smoke-free products, Altria reported a slight 0.9% decline in sales after excise taxes last year. Careful cost management and share buybacks enabled the company to report adjusted earnings up 2.3% last year.

Altria probably isn’t going to post impressive dividend growth rates in the next few years. But with such a high dividend yield, it still has what it takes to generate market-beating returns over the long term.

ares capital

ares capital (NASDAQ:ARCC) is America’s largest publicly traded business development company (BDC). Mid-market companies typically have annual revenues of more than $10 million, but still cannot obtain financing from large U.S. banks.

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Capital-hungry mid-sized companies are willing to pay above-average interest rates. The average yield on the BDC’s bonds and other income-producing securities reached 12.4% as of September 30th.

Ares Capital is highly established, boasts an investment-grade credit rating, and maintains a lower cost of capital than most of its peers. Recently, BDC was able to borrow $1 billion at 5.875% through the sale of unsecured notes maturing in 2029.

At recent prices, Ares Captial stock offers a great dividend yield of 9.5%. Dividends haven’t been growing rapidly, but they have increased by 20% over the past three years. With such a wide disparity between the cost of capital and the interest rates that mid-market companies are willing to accept, investors can reasonably expect this BDC to maintain or increase its dividend in the coming years.

AT&T

As one of the three leading telecommunications service providers in the United States, investors can expect reliable returns from the company. AT&T (New York Stock Exchange: T). Despite being part of the American telecommunications oligopoly, AT&T stock offers a hefty 6.2% dividend yield at recent prices.

Investors are a little nervous about AT&T after selling its media assets because of its huge debt burden. Now that it is fully in the telecommunications business once again, investors can expect steadily increasing cash flow from new mobile and broadband internet subscribers.

Mobility services revenue increased 4.4% last year due to the successful rollout of 5G, but this is not the fastest growing segment. Broadband revenue in 2023 increased 8.1% year over year.

Broadband revenue is led by AT&T Fiber, which added 1.1 million new contracts last year. The number of new subscribers exceeded 1 million for the sixth consecutive year.

In 2023, AT&T reported an 18% increase in free cash flow 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 a ton of new broadband subscribers, it’s very likely that it can chip away at its debt burden and increase its dividend significantly over the next few years.

Should you invest $1,000 in Altria Group right now?

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Cory Renauer has a position at Ares Capital. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.

Want to earn $1,000 a year in dividend income? Invest $11,900 in these three high-dividend stocks.Originally published by The Motley Fool