For investors looking to create passive income, certain stocks stand out as good options.
In today’s volatile market, where the foundational stability seems shaky, those who can tolerate some risk might want to focus on stocks that provide consistent streams of passive income.
It’s important to clarify that while dividend stocks aren’t without risk, many investors find confidence in their potential to consistently pay dividends. This method can lead to steady wealth accumulation. Here are three top dividend stocks to consider buying this August.
1. Real Estate Income: A Model of Consistency
Consider Real Estate Income, a self-described monthly dividend company. As a real estate investment trust (REIT), it’s well-known for issuing substantial dividends. REITs can avoid corporate taxes if they adhere to certain requirements, such as deriving at least 75% of their income from eligible real estate activities, provided they distribute earnings to shareholders as dividends.
While their dividends may vary with income, the company’s overall earnings are quite solid. With a 5.6% yield, it has paid monthly dividends for 30 years consecutively, even managing to increase annual payments at an average growth rate of 4.3%.
Operations are based on triple net leases, meaning tenants cover property taxes, maintenance, and insurance. This arrangement can work well for businesses that often need flexibility with costs and space. Real Estate Income targets companies in lower-cost sectors with an emphasis on service.
In 2024, it generated adjusted funds from operations (AFFO)—essentially REIT free cash flow—of $4.19 per share and paid an annual dividend of about $3.13 per share.
2. Pfizer: A Commitment to Dividends
You might have heard of Pfizer, particularly due to its significant role in vaccine development during the early COVID pandemic. The company, however, has faced challenges as inventory dropped around 34% since peak levels in late 2021. With declining vaccine sales, investors are curious about what’s next for them.
In 2023, Pfizer made headlines by acquiring Seagen for approximately $43 billion to enhance its drug pipeline, especially in cancer treatment. They anticipate this move might bring in an additional $10 billion in revenue by 2030. The company also outlined plans for $7.2 billion in cost savings by the end of 2027 in their first-quarter revenue report.
Despite having cut dividends in half back in 2009, Pfizer has consistently paid and increased its quarterly dividends since then, currently boasting a yield of 7.1%. While this is significant, the company has a 12-month free cash flow yield of 8.14%.
Doubts had arisen during the first-quarter revenue call about maintaining and growing dividends, especially since some patents are nearing expiration. There’s a lack of clarity regarding potential tariff rates, especially under previous administration policies.
Still, Pfizer’s Chief Financial Officer, David Denton, has reiterated the importance of dividends as a core part of the capital allocation strategy, expressing a commitment to maintaining and potentially increasing them over time.
3. SiriusXM: Robust Free Cash Flow Generation
Then there’s Sirius XM Holdings, a digital audio company that’s working on a comeback. Shares have struggled in recent years, decreasing by about 60%. However, management is initiating a turnaround plan, offering close to 4.7% yields to investors during this recovery phase.
Owning Sirius Satellite Radio and Pandora, the company has faced tough competition, particularly from platforms like Spotify, leading to a decline in subscribers. Last September, Sirius unveiled a long-term strategy to gain 10 million subscribers—raising the total to 50 million—and increasing free cash flow by 50% to $1.8 billion.
To achieve this, management plans to refine technology and pricing, expand advertising initiatives, and secure rights for popular podcasts. Signs of momentum are emerging for the latter half of 2024, with an uptick in self-paid subscribers, although they did see a net loss of over 300,000 subscribers in the first quarter of 2025.
Nonetheless, SiriusXM remains an attractive choice for dividend investors. This year, it generated $1.15 billion in free cash flow, and projections suggest it could pay out $364 million in annual dividends based on first-quarter data, which leaves a comfortable margin.
