Key Points

• As expected, the Federal Reserve lowered rates by 25 basis points earlier this month.
• Some on Wall Street feel the Fed could pause after another cut in December.
• Passive income is simple: own quality dividends that pay you for doing nothing. Don’t miss out on our brand-new “7 Things I Demand in a Dividend Stock” report. It includes two A++ dividend stocks and how to spot future dividend winners that can put your returns on hyperdrive.

Most dividend investors seek solid passive income streams from quality dividend stocks. Passive income is a steady stream of unearned income that doesn’t require active traditional work. Shared ideas for earning passive income include investments like dividend stocks, bonds, mutual funds, real estate, and additional income-producing side hustles.

The more passive income can help cover costly and rising costs like mortgage, insurance, taxes, and other expenses, the easier it is for investors to put away money for future needs as they build to retirement.

According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade, business, or investment in which the individual does not materially participate.

Investors have a lot to be thankful for because this Thanksgiving, the stock market has been up over 50% over the past two years, making the stretch one of the biggest two-year rallies in decades. With volatility making a big rebound and some inevitable profit taking on the way before the year is out, passive income investors can take advantage of a dip in five of our favorite high-yield companies. All are rated buy at top Wall Street firms, and all five pay 7% and higher dividends.

Why do we cover dividend stocks?

Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.

Ares Capital

This high-yielding business development company (BDC) pays a massive 8.90% dividend. Ares Capital Corp. (NASDAQ: ARCC) specializes in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle-market companies.

It also makes growth capital and general refinancing. It prefers to invest in companies engaged in basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors.

The fund will also consider investments in industries such as:

• Restaurants
• Retail
• Oil and gas
• Technology

It focuses on investments in the Northeast, Mid-Atlantic, Southeast, and Southwest regions from its New York office, the Midwest region from the Chicago office, and the Western region from the Los Angeles office.

The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million

The fund invests through:

• Revolvers
• First-lien loans
• Warrants
• Unitranche structures
• Second-lien loans
• Mezzanine debt
• Private high yield
• Junior Capital
• Subordinated debt
• Non-control preferred and common equity.

The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically finds the purchase of stressed and discounted debt positions.

Ares Capital prefers to be an agent and lead the transactions it invests in. The fund also seeks board representation in its portfolio companies.

British American Tobacco

This European giant continues to print money, has a vast product line, and pays a huge 8.65% dividend. British American Tobacco PLC (NYSE: BTI) offers:

• Vapor
• Tobacco heating
• Modern oral nicotine products
• Combustible cigarettes
• Traditional oral products, such as snus and moist snuff

The company offers its products under these brands:

• Vuse
• Glo
• Velo
• Grizzly
• Kodiak
• Dunhill
• Kent
• Lucky Strike
• Pall Mall
• Rothmans
• Camel
• Natural American Spirit
• Newport
• Vogue
• Viceroy
• Kool
• Peter Stuyvesant
• Craven A
• State Express 555
• Shuang Xi

Energy Transfer

This top master limited partnership is a safe way for investors looking for energy exposure and income, as the company pays a massive 7.78% distribution. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all of the major domestic production basins.

The company is a publicly traded limited partnership with core operations that include:

• Complementary natural gas midstream
• Intrastate and interstate transportation and storage assets
• Crude oil, natural gas liquids (NGL), and refined product transportation and terminalling assets
• NGL fractionation and various acquisition and marketing assets

Energy Transfer owns and operates more than 114,000 miles of pipelines and related assets in all significant U.S.-producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.

Through its ownership of Energy Transfer Operating, the company also owns Lake Charles LNG, the general partner interests, the incentive distribution rights, and 28.5 million standard units of Sunoco L.P. (NYSE: SUN), and the public partner interests and 39.7 million standard units of USA Compression Partners L.P. (NYSE: USAC).

Xerox Holdings

The company is not just making copies but delivers a sweet 10.05% dividend. Xerox Holdings Corp. (NASDAQ: XRX) operates as a workplace technology company that integrates hardware, services, and software for enterprises in the Americas, Europe, the Middle East, Africa, India, and internationally.

The company operates through two segments:

• Print and Other
• FITTLE

The Print and Other segment designs, develops and sells document systems, solutions, and services, as well as IT and software products and services.

The FITTLE segment offers financing solutions for direct channel customer purchases and lease financing to end-users.

It also offers workplace solutions comprising:

• Desktop monochrome, color, and multifunction printers and ConnectKey software
• Digital printing presses and light production devices
• Digital services that support workflow automation, personalization and communication software, content management solutions, and digitization services

In addition, the company provides:

• Graphic communications
• In-plant and production solutions
• FreeFlow, a software solution for the automation and integration of processing of print jobs comprising file preparation
• Final production and electronic publishing and IT services
• End-user computing devices, network infrastructure, and communications technology
• Technology product support, professional engineering, and commercial robotic process automation
• Further, it sells paper products and standalone software, such as CareAR, DocuShare, and XMPie, and invests in startups.

Western Union

While the demand for telegrams is long gone, the demand to transfer money is not, and this famous company has grown as a result. It pays a strong 8.42% dividend. Western Union Co. (NYSE: WU) provides worldwide money movement and payment services. The company operates in two segments.

The Consumer-to-Consumer segment facilitates international cross-border and intra-country money transfers, primarily through a network of retail agent locations, websites, and mobile devices.

The Business Solutions segment provides payment and foreign exchange solutions, primarily cross-border and cross-currency transactions for small and medium-sized enterprises, other organizations, individuals, and foreign currency forward and option contracts.

It also offers bill payment services that facilitate payments from consumers to businesses and other organizations, as well as offers money orders and other services.

Four Contrarian Ultra-High-Yield Stocks Pay Passive Income Dividends as High as 15%

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