Passive income can help secure your retirement, but building a dependable income is not easy. You must be able to identify stocks to buy and hold for decades. There are top-tier dividend stocks with strong yields, steady payouts, and business models that can survive any market uncertainty. In the current market, dividend investing has become the gold standard.
You can invest in top-quality stocks that will offer steady income and a cushion against downside risk. I’ve identified three dividend stocks that are cheap and will generate passive income for you for several years. Each of these stocks is trading at a discount. Let’s take a look at them.
Pfizer Inc.
Pharmaceutical giant Pfizer Inc. (NYSE: PFE | PFE Price Prediction) offers a juicy 6.65% dividend yield and is one of the highest-yielding stocks in the sector. It enjoyed a revenue boom during the pandemic, but the growth has slowed since then. The stock looks cheap to me at $25.86, and investors are waiting for the next phase of the company’s growth.
While the company has a high payout ratio, the pharmaceutical giant has the ability to sustain the payouts. Pfizer has one of the strongest balance sheets in the industry and enough liquidity to continue rewarding the shareholders. It has a payout ratio of 53.13% and pays an annual dividend of $1.72 per share. The company has a portfolio of drugs that generate enormous cash flow. It has raised dividends for 15 consecutive years.
Its acquisition of Metsera for $10 billion has put it in the billion-dollar weight loss market. The company has mentioned the possibility of bringing new oncology drugs to the market by the end of this decade.
Pfizer’s promising pipeline of drugs in immunology and cancer has placed the company in a strong position in the industry. It not only offers an exceptional yield but also the potential for capital appreciation. This is the year Pfizer could reset, and a rebound could begin.
In the third quarter, it reported an EPS of $0.87 and revenue of $16.65 billion. The company is expected to report results on February 3.
Target Corporation
Target (NYSE:TGT) stock has been in a tough spot for a while now. Despite the high yield of 4.48%, the stock hasn’t been able to attract investors. However, I think it is worth the risk. The retailer has a market cap of $46 billion and owns about 2,000 stores across the United States.
Target has suffered due to the market uncertainty, tariff concerns, and low consumer spending. However, it is taking steps to make this right. The company has brought in a new CEO to create the right turnaround approach.
Target is a well-established company with strong fundamentals and the ability to weather any storm. It has a history of raising dividends for over five decades, and a company cannot do this by accident. Target has the ability to attract customers, generate cash flow, and reward investors. It has a payout ratio of 59.68% and pays an annual dividend of $4.56 per share. The company has a 5-year dividend growth rate of 11.02%.
The third quarter revenue was $25.27 billion, and the EPS was $1.78. Its sales have remained roughly stagnant for a while now. Its digital sales continue to soar higher, and the management is investing money in the segment. The company is committed to adding more items to the shelves and is taking steps to sharpen the merchandise.
Exchanging hands for $101.74, the stock has lost 27% in value over the past year. I believe the company will be able to turn around the story, and its baby steps could pay off in the long term.
Verizon Communications
Telecommunications company Verizon (NYSE:VZ) is another dividend stock that hasn’t disappointed investors. It has a yield of 7% and has increased dividends for 21 years. Not many companies have a yield as high as VZ stock, and not every company can sustain the dividends.
The company has a payout ratio of 57.68% and pays $2.76 annually per share. Verizon recently completed the acquisition of Frontier, which will help its broadband network and expand the services to customers.
It offers broadband and wireless services in the market and generates steady cash flow. It has seen the debt going down, and there’s new management ready to transform the business. While it operates in a less glamorous market, it caters to a large audience and is a part of one of the most important industries today. It isn’t possible for us to survive without our phones, and Verizon is set to benefit there.
It generates recurring revenue since consumers pay for the internet services. This money is used to expand its network and maintain the dividends. Verizon Communications has exceeded expectations in the past four quarters and impressed the market. The company is set to report results tomorrow, and while it wouldn’t have much impact on the stock, it will be interesting to see how the management aims to approach 2026.
VZ stock is exchanging hands for $39.41.
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