Investing in dividend stocks offers an opportunity to generate passive income. That passive income can grow each year if you reinvest the dividends and the dividend-paying corporation continues to increase its dividend each year.

While high-yield dividend stocks tend to underperform benchmarks like the S&P 500, they make up for it with cash flow and relatively more stability than growth stocks.

While passive income stocks don’t produce much income in the beginning, it will compound over time as you grow your portfolio. Investors who are looking for some ideas may want to consider these promising dividend stocks to buy.

24/7 Wall Street Key Points:

• Passive income stocks allow investors to generate cash flow without having to sell their shares.
• Accumulating enough dividend stocks can help an investor cover their living expenses.

Why are we covering this?

We have covered dividend stocks for more than a decade. This asset class can deliver passive income for investors and also has the potential to gain value over time. We feel it is important to inform readers about dividend stocks that can boost their cash flow.

Extra Space Storage

Extra Storage Space (NYSE:EXR) is a real estate investment trust that specializes in storage space. The stock has a 4.39% yield and operates in a recession-resistant industry. Consumers put valuable items in self-storage facilities, so they can’t cancel that monthly expense as easily as a streaming subscription.

The stock is in the middle of a correction, which has boosted the yield. However, shares remain up by more than 40% over the past five years. The firm’s core funds from operations increased by 2.5% year-over-year in the third quarter. Extra Storage Space currently manages 1,921 stores. Net rental income remained roughly flat year-over-year.

This REIT regularly delivers net profit margins above 20% and has posted higher revenue numbers over the past few quarters. Lower interest rates can lead to more growth, as this development will make it easier and cheaper for the company to finance additional deals.

Qualcomm

While Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) steal the AI spotlight, there are plenty of overlooked AI stocks, including Qualcomm (NASDAQ:QCOM). The semiconductor firm has a 2.22% yield and a respectable 17 P/E ratio. Furthermore, Qualcomm has been posting solid revenue and net income growth in recent quarters, including the most recent one.

Revenue jumped by 19% year-over-year in Q4 FY24 while net income almost doubled. Qualcomm regularly posts net profit margins above 20%, and those margins almost reached 30% in the quarter. Upcoming products can help Qualcomm gain market share in handsets, PC, automotive, industrial IoT, and other industries that rely on semiconductors. 

Qualcomm also comes with decent dividend growth for a stock that yields more than 2%. The firm raised its annual dividend from $3.20 per share to $3.40 per share earlier this year, representing a 6.25% increase.

Proctor & Gamble

Few passive income stocks offer the same level of consistency as Proctor & Gamble (NYSE:PG). The company has been paying out dividends for 134 consecutive years, and that also includes 68 consecutive years of dividend hikes. 

The company offers a wide range of everyday products in beauty, grooming, health care, and other industries. Proctor & Gamble is set up to resist recessions, but it’s unlikely to outperform the stock market. Shares are only up by 35% over the past five years, but that doesn’t include the stock’s high 2.38% yield. 

Procter & Gamble makes more sense for investors who want reliable passive income without much volatility. The company’s shares only dropped by roughly 7% in 2022, a year that saw many tech stocks lose 30%-50% of their value.

Home Depot

Home Depot (NYSE:HD) is one of the best dividend growth stocks for investors who want respectable returns, a good yield, and a high dividend growth rate. The home improvement retail company is up by 76% over the past five years while providing a 2.31% yield for investors.

HD stock provided an annualized dividend of $9.00 per share in 2024, which is a 7.7% increase from last year’s $8.36 annualized dividend. The Home Depot is due to raise its dividend in Q1 2025.

Earnings have been good, as the company delivered a 6.6% year-over-year improvement in Q3 2024 sales. Net income dipped slightly year-over-year, but Home Depot should see strong financials as interest rates continue to drop.

UPS

UPS (NYSE:UPS) hasn’t had the best year, but that’s one of the reasons it looks like a compelling passive income stock. Shares of the logistics company are down by more than 20% year-to-date. That drop has resulted in a hard-to-ignore 5.29% yield for a company that has been reporting financial growth.

In Q3 2024, UPS increased revenue by 5.6% year-over-year. Meanwhile, net income was up by 36.6% year-over-year. That’s not bad for an essential company that trades at a 19 P/E ratio.

UPS should continue to benefit from the growing demand for e-commerce. Even though we’ve heard about e-commerce’s growth for well over a decade, it’s still growing. For instance,  Black Friday e-commerce sales increased by 10% year-over-year, while retail traffic dropped by 8% year-over-year. UPS benefits from these changes and can reward shareholders with passive income for many years.

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