Bond yields are one option for passive income investors, but they’re definitely not the only possibility. Sure, you can get a yield of around 4% from 10-year U.S. Treasury bonds, but you can probably achieve better returns with dividend-paying stocks.
Bear in mind, you can get both share-price gains and dividend payments from some stocks. Consequently, if you put your money in dividend stocks, you have a chance at beating the predictable returns from government bonds.
Besides, it’s very likely that government bond yields will get slashed this year and/or next year. So, if you’re willing to sacrifice predictability in a quest for superior returns, check out these four outstanding dividend stock picks with decent yields and powerful growth potential.
Lockheed Martin (LMT)
Recent geopolitical events have put aerospace and defense contractors in the spotlight. A beneficiary of international conflicts is Lockheed Martin (NYSE:LMT | LMT Price Prediction), a well-established defense contractor for public-sector and private clients.
Mind you, this list isn’t populated with stocks that pay yields exceeding 4% (which is what you might get from government bonds). Instead, we’re concentrating on stocks which could easily beat 4% yearly returns through dividend distributions and share-price appreciation.
Lockheed Martin stock is a perfect example of this. After holding LMT shares for a full year, you should expect to get a forward dividend yield of 2.06%.
Then, to outperform a 4% bond, Lockheed Martin stock would only need to rise more than 2%. That’s very likely since Lockheed Martin is a revenue-rich and profitable defense business.
Don’t just take my word for it, though. As the data will show, Lockheed Martin’s sales improved from $67.571 billion in 2023 to $71.043 billion in 2024, to $75.048 billion in 2025.
All told, Lockheed Martin reported $5.017 billion in net earnings for 2025. With cash and cash equivalents totaling $4.121 billion at the end of last year, it’s fair to say that Lockheed Martin should be able to pay out dividends for the foreseeable future.
Cisco Systems (CSCO)
Next, we’re going to diversify into the technology sector with Cisco Systems (NASDAQ:CSCO) stock. To give you some background info, Cisco Systems is a communications/networking products provider with a market capitalization exceeding $300 billion.
The company’s most recently released quarterly financial report indicates that Cisco Systems booked $14.883 billion in revenue for the three months ended October 25, 2025. That’s a notable improvement over the $13.841 billion that Cisco Systems generated in the year-earlier period.
Furthermore, Cisco Systems grew its net income from $2.711 billion in the year-earlier quarter to $2.86 billion in the three months ended October 25, 2025. That’s not blockbuster growth, but it is a positive sign that Cisco Systems is in stable financial condition.
In all likelihood, CSCO stock will gain value in the coming quarters. Along with that, investors can expect Cisco Systems to deliver an annualized dividend yield of 2.1%; this ought to make it easy to outperform bonds when all is said and done.
Bank of America (BAC)
Switching over to the financial sector, another way to possibly beat government bonds is by investing in Bank of America (NYSE:BAC). Since BAC stock is already anticipated to provide a 2.25% annual dividend yield, you wouldn’t need much share-price growth to come out ahead.
Can investors feel secure with shares of a banking behemoth like Bank of America? The facts look favorable, as Bank of America’s revenue expanded its revenue from $26.5 billion in 2024’s fourth quarter to $28.4 billion in the fourth quarter of 2025.
During the same time frame, Bank of America’s net income increased from $6.8 billion to $7.6 billion. Suffice it to say, then, that Bank of America is flush with capital and sensible investors can hold BAC stock with confidence.
Yum! Brands (YUM)
Even if you’re not familiar with Yum! Brands (NYSE:YUM), you will surely know its famous fast-food brand names. These include Pizza Hut, Taco Bell, and KFC.
These brands have survived the ups and downs of America’s economy throughout the years. YUM stock might not be 100% recession-proof, but it’s less volatile than many other large-cap stocks out there.
Yum! Brands’ 2025 results drive home the point that this is a successful consumer-goods business. During that year, the company recorded GAAP-measured earnings of $1.91 per share, versus $1.49 per share in 2024.
In other words, YUM stock isn’t just a safety play; it’s also a possible vehicle for growth. Plus, Yum! Brands currently offers a 1.89% forward annual dividend yield, indicating an excellent chance for investors to achieve superior overall returns to a basic bonds buy-and-hold strategy.
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