The Best Dividend Stocks for Passive Income

In this article, we will explore some of the best dividend stocks for generating passive income. Passive income, which refers to money earned with minimal ongoing effort, has traditionally been associated with the wealthy—those who could invest in rental properties or build portfolios that reliably generated dividends. However, since the pandemic, the concept has gained traction, particularly among millennials and Gen Z, who are discovering innovative ways to create passive income streams.

The Rise of Passive Income

The surge in interest in passive income is driven by a combination of challenging job market conditions and the pervasive influence of social media. While passive income can be a viable option for some, it often proves more complex in practice than the promise of easy earnings suggests. Side hustles have become increasingly popular as a means for individuals to supplement their income. Gen Z, in particular, has moved beyond the misconception that passive income requires no effort. They view launching a side business as a legitimate way to earn money alongside a full-time job.

In the past, starting a business often meant renting a physical storefront and investing in traditional advertising. Today, entrepreneurs can build websites from home using platforms like Squarespace, promote products on TikTok, and hold meetings over Zoom. For Gen Z—many of whom were born in the late 1990s—these digital tools have been integral to their lives for as long as they can remember.

Natasha Stanley, head coach at Careershifters.org, notes that individuals now have far more resources at their disposal to build something independently. The shift toward remote work and education during the pandemic has made self-employment feel more attainable for many.

The Power of Dividend Stocks

One proven method for generating passive income is through investments in dividend stocks. Companies that generate surplus profits often share a portion of that money with their investors through dividends. The amount returned is typically measured using the dividend yield, calculated by dividing the yearly dividend payment by the current stock price.

Brian Bollinger, founder of Simply Safe Dividends, emphasizes that building a portfolio focused on dividend-paying stocks can be transformative. He explains that relying on regular dividend payments—rather than solely on profits from selling stocks—can help mitigate the risk of depleting your investments. Unlike managing rental properties, collecting dividends requires minimal effort. Bollinger states:

“You could be setting yourself up quite nicely. Because not only do stocks pay a dividend, but they might increase the dividend, and they could benefit from price appreciation as a result of improving earnings outlook and so forth. It’s really about finding companies that can pay safe and rising dividends over time.”

Given this, let’s take a look at some of the best dividend stocks for passive income.

Our Methodology

For this article, we analyzed Insider Monkey’s database of over 1,000 hedge funds as of Q4 2024 and selected stocks with strong dividend policies, sound financials, and histories of dividend growth. We focused on stocks with a minimum yield of 1% as of April 24. The stocks are ranked based on the number of hedge funds holding stakes in them.

Why focus on stocks that hedge funds favor? Research shows that mimicking the top stock picks of successful hedge funds can lead to market outperformance. Our quarterly newsletter’s strategy has returned 373.4% since May 2014, significantly beating its benchmark by 218 percentage points.

Top Dividend Stocks for Passive Income

15. Black Hills Corporation (NYSE: BKH)

Number of Hedge Fund Holders: 24

Black Hills Corporation is a diversified energy company based in South Dakota, providing electric and gas utility services to approximately 1.35 million customers across several states. The company boasts a solid financial standing, supported by an investment-grade balance sheet. Its customer growth rate is nearly three times the national average, making it a stable investment option amid market volatility.

In Q4 2024, Black Hills reported revenue of $597 million, reflecting a modest 1% growth year-over-year. The company’s operating income rose significantly, and it has increased its five-year capital spending outlook by 10%, totaling $4.7 billion. Black Hills currently offers a quarterly dividend of $0.676 per share, marking its 55th consecutive year of dividend growth, with an attractive yield of 4.46%.

14. Expeditors International of Washington, Inc. (NYSE: EXPD)

Number of Hedge Fund Holders: 35

Expeditors International is a logistics company that provides services such as air and ocean freight and customs brokerage. In Q4 2024, the company reported a remarkable 30% revenue growth, driven by robust demand from Asia and disruptions in ocean transport. Its earnings per share rose by 54%, and net earnings attributable to shareholders climbed 49%.

Expeditors maintains a strong cash position, ending the quarter with $1.15 billion in cash and equivalents. The company returned $1.1 billion to shareholders through dividends and share repurchases. It currently offers a quarterly dividend of $0.73 per share, yielding 1.33%, and has a history of increasing dividends for the past 30 years.

13. Realty Income Corporation (NYSE: O)

Number of Hedge Fund Holders: 36

Realty Income Corporation is a real estate investment trust (REIT) that invests in single-tenant commercial properties across the U.S. It stands out for offering monthly dividends to shareholders. The company declared a quarterly dividend of $0.2685 per share, maintaining a strong track record with 130 dividend increases since its IPO in 1994.

Realty Income holds over 15,600 properties, providing geographic diversification and a strong financial position backed by an investment-grade credit rating. The stock has surged nearly 9% since the start of 2025, and it currently offers a dividend yield of 5.63%.

Conclusion

Investing in dividend stocks can be a powerful strategy for generating passive income. As we’ve seen, companies like Black Hills Corporation, Expeditors International, and Realty Income Corporation not only provide attractive dividends but also demonstrate strong financial health and growth potential. For those looking to build a reliable income stream, these stocks represent some of the best options available today.