Investors seeking dependable passive income may consider exploring dividend-paying stocks with compelling yields. Among such options, a carefully balanced investment of $12,500 divided equally across five notable companies could yield an aggregate annual dividend income exceeding $1,000 in 2026, equating to roughly an 8.3% yield on the total investment.
| Dividend Stock | Investment | Current Yield | Annual Dividend Income |
|---|---|---|---|
| Ares Capital (ARCC) | $2,500.00 | 9.5% | $237.50 |
| Energy Transfer (ET) | $2,500.00 | 8.2% | $204.00 |
| Starwood Capital (STWD) | $2,500.00 | 10.3% | $257.50 |
| UPS (UPS) | $2,500.00 | 6.5% | $163.50 |
| Verizon (VZ) | $2,500.00 | 6.8% | $171.00 |
| Total | $12,500.00 | 8.3% | $1,033.50 |
Below is an in-depth examination of these income-oriented stocks and their characteristics.
Ares Capital
Ares Capital operates as a business development company (BDC), specializing in providing capital primarily to private middle-market enterprises generating annual revenues between $100 million and $1 billion. The firm's portfolio is heavily weighted—approximately 71%—toward senior secured loans in sectors that tend to exhibit lower cyclicality. With cumulative investments totaling $28.7 billion across 587 portfolio companies, the firm boasts an impressive history of minimal realized losses, indicating strong underwriting discipline.
As a regulated BDC, it is mandated to distribute at least 90% of its taxable income to shareholders, enabling attractive dividend payouts. Ares Capital has maintained a track record of 16 years of consistent or rising quarterly dividends. Its portfolio's defensive positioning along with robust financial fundamentals suggests that its dividend stream is poised for stability and potential growth through 2026 and beyond.
Energy Transfer
Energy Transfer is structured as a master limited partnership (MLP), an arrangement that provides investors with a Schedule K-1 tax form annually. The company operates an extensive midstream energy infrastructure network, including pipelines, processing facilities, and export terminals. Approximately 90% of its EBITDA is derived from stable, fee-based contracts, involving long-term agreements and regulatory frameworks.
The MLP allocates about 50% of its stable cash flow to investors as distributions, retaining the remainder to finance expansion initiatives. Currently in a strong financial position, Energy Transfer is actively investing in a multi-billion-dollar slate of growth projects slated for commercial operation through the end of the decade. These expansions underpin the company's outlook to increase distributions by an estimated 3% to 5% annually moving forward.
Starwood Capital
Starwood Capital functions as a real estate investment trust (REIT) with diversified investments spanning commercial mortgages, infrastructure-backed loans, and direct property ownership, generating interest and rental income.
Its diversification strategy has helped sustain dividend payments for over ten years, despite varying real estate market cycles. The company's portfolio encompasses a recently acquired $2.2 billion net lease platform, consisting of 467 properties secured by long-term leases averaging 17 years with annual rent escalations of 2.2%. This platform is integral to Starwood's intentions to provide steady and growing income streams to support its dividend obligations.
UPS
UPS, a global leader in logistics, has experienced operational challenges recently, causing its share price to decline more than 50% from previous highs and elevating its dividend yield to 6.5%. Contributing pressures include elevated labor costs, difficult shipping market conditions, tariffs, and strategic decisions to lessen dependence on Amazon.
Although UPS's free cash flow of $2.7 billion this year falls short of covering its $4 billion dividend payments, the company has implemented cost-saving initiatives targeting $3.5 billion by year-end. Coupled with a solid liquidity position expected to close at $5 billion in cash, UPS management expresses confidence in maintaining its dividend, which has never been cut since its initial public offering in 1999. Dividend continuity remains a core financial commitment for the company.
Verizon
Verizon Communications stands out as a robust cash generator, largely due to its substantial recurring revenue base derived from mobile and broadband customers. This consistent cash flow comfortably covers capital expenditure requirements and dividend payments, allowing the company to maintain a strong balance sheet.
Significant investments in expanding 5G and fiber-optic networks aim to enhance customer service with faster speeds and greater capacity. These capital expenditures are expected to yield revenue and free cash flow growth, bolstering Verizon's capacity for sustained dividend increases. The company has a notable history of raising its dividend for 19 consecutive years.
Considerations
The collective profile of these five companies highlights robust dividend yields coupled with credible histories of stable or growing payouts. This combination of attractive income potential and resilience may make them suitable components of a portfolio focused on passive income generation in 2026.
Investors evaluating this lineup should consider each firm's specific risks and operational contexts, as summarized below.