A volatile period reminds investors of the importance of passive income. If you’re solely dependent on one source of income, you’ll feel overwhelmed during market volatility. But, if you’ve diversified your investments and have multiple sources of income, you can enjoy steady, passive income.
However, the challenge is to find yields high enough to generate passive income at little risk. A combination of exchange traded funds (ETFs), high yield dividend stocks and real estate investment trusts (REITs) can easily generate passive income of $500 a month, amounting to $6,000 annually. Here are three investments worth considering.
Realty Income
Realty Income (NYSE: O | O Price Prediction | O Price Prediction) is an REIT that pays monthly dividends. The company calls itself “The Monthly Dividend Stock.” It has delivered an annualized total return of 13.3% since market listing and has outperformed the S&P 500 over the past decade. What makes it a strong investment is the dividend yield of 5.11%. That said, you receive a monthly check.
The fund can generate steady returns over the long term, mainly driven by the rising dividends. REITs are required to distribute 90% of their income to shareholders, and Realty Income has increased its payout every year since its public listing. It has paid a dividend for 114 consecutive quarters. Investing $50,000 in the stock can generate $2,555 annually at the current dividend yield.
The REIT owns a diversified portfolio of properties with long-term triple net leases. It has been leased to some of the world’s leading companies, which helps ensure steady income. Realty Income owns over 15,000 properties across the globe at an occupancy rate of 98.9%.
It has a payout of 75% and retains the balance for reinvestment. Realty Income has one of the strongest balance sheets in the sector, supporting the dividends. It pays a monthly dividend of $0.270 per share at an annualized rate of $3.24 per share.
State Street SPDR Portfolio S&P 500 High Dividend ETF
The State Street SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA:SPYD) is worth considering if you want to invest in a mix of stocks and ETFs. It measures the performance of the top 80 high dividend-yielding companies in the S&P 500 index and has a yield of 4.52%. Despite investing in only 80 stocks, the ETF is well balanced, and no stock has a weightage higher than 2%.
SPYD has the highest allocation to the real estate sector (25%), followed by consumer staples (16.29%) and financials (11.96%). Its top 10 holdings include APA Corporation, Dow Inc., Verizon Communications, and Target Corporation. The fund has an expense ratio of 0.07% and pays quarterly dividends.
SPYD will get you higher and faster-growing dividends. It has grown dividends at 19.44% annually in the past decade. An investment of $50,000 will generate $2,260 in annual dividends. It has an annual payout of $1.99.
SPYD’s dividend looks fairly safe, and it is a low-risk investment option. With this ETF, you get to invest across different sectors and own high-yield stocks at a low cost. Based on your investment amount, you can allocate between stocks and ETFs, but SPYD could be an ideal addition to your portfolio.
NextEra Energy
Energy company NextEra Energy (NYSE:NEE | NEE Price Prediction) is the largest U.S. electric utility company and serves over 12 million people across Florida. It is also the world’s largest generator of wind and solar power, with a backlog of 30 GW of generation and storage projects. By being a utility and a renewable energy company, NextEra Energy benefits from the growing demand for energy from both segments. It has a strong profile of a clean energy developer.
The company has set a record of 13.5 GW of new origination in 2025 and is set to keep growing this year. It has also partnered with Alphabet (NASDAQ:GOOG) to recommission the Duane Arnold nuclear plant, adding another revenue stream to the portfolio. The demand for energy is going to keep growing, and this is where NextEra Energy is set to benefit.
NEE stock has a dividend yield of 2.63% and is among the strongest in the utility sector. The management is aiming for a dividend growth of 10% per year through 2026. It recently announced a dividend of $0.6232 per share. An investment of $50,000 in the stock will generate $1,315 in annual dividends. I think NEE is one of the safest dividend stocks to own for long-term growth.
The Bottom Line
Generating $6,000 in passive income is easier than you think. You do not need to invest $50,000 each in these stocks and ETFs. Instead, you can make a larger investment in the stocks and invest the balance in the ETF. Each of the three options listed above is a reliable dividend investment.
Reinvestment of the dividends can help build wealth over the years.
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