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The phrase “passive income” may have different meanings to different people, so let’s define how I am using it in this article before highlighting a trio of stocks that can provide it. One definition I found was “money earned with minimal effort.” And while this year’s spike in AI-driven stocks, cryptocurrencies and so-called “meme” stocks might have made it seem like money can be earned without a lot of energy expended, experienced investors should be skeptical about that.
Even when investing for yield, the dividend part of the total return may produce low-stress income over many years’ time. However, the price fluctuation that comes with any style of stock investing does not vanish, just because quarterly dividend payments are hitting the account, even if those payments increase regularly. With that out of the way, let’s dive in and review three “passive income” stocks I chose to focus on here.
How These Dividend Stocks Were Chosen
Here's what I considered as priorities in this particular effort. First, profitability is always important to me, as it reduces the ongoing worry about something going wrong. Dividend yield level was important, but dividend safety was even more critical. I looked for stocks with at least a 3% annual payout, but with a history of reliability in funding and delivering that payout.
The other factor of high importance here was a demonstrated history of below-average price fluctuations. I measured that by screening for 5-year “beta,” which is a popular measure of stock price volatility. I looked for stocks that during that time were between 40% and 80% as volatile as the S&P 500, over a period since late 2019 that included a pandemic and a very rough 2022 for stocks.
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3 Top Dividend Stocks To Buy In 2025
Source: YCharts
1. Merck (MRK)
Business Overview
Merk is certainly not a newbie to many equity investors. The company dates back to 1891, and is one of the largest pharmaceutical companies in the world. Its operation includes oncology, acute care, virology, cardiovascular and animal health. It also has a long list of collaborative research efforts with other leaders in its field.
Why MRK Is A Top Choice
Merck is a true blue chip stock, but has been under pressure price-wise since this past summer. With the stock falling from $135 to just above $100 in nearly a straight line, its dividend yield has pushed back to 3%, and its price trend is starting to show signs of a long-term rebound. That $100 level is where it bottomed back in 2023, and that provides some long-term total return cushion for what has historically been a low-volatility stock. Potential pressure on healthcare stocks from a new government intent on making changes to the status quo is naturally a concern. But the stock’s recent decline may have already priced much of that in.
2. Kimberly-Clark (KMB)
Business Overview
This Dallas-based behemoth in the consumer staples sector also dates back more than 100 years, and operates through three primary segments: personal care, consumer tissue and professional. Huggies, Kotex, Kleenex, Cottonelle and Scott are among its name brand products.
Why KMB Is A Top Choice
The largest consumer brand stocks are easy to include in this list due to their deeply-entrenched market share in a number of areas that are considered somewhat recession-resistant. That is, people don’t stop buying diapers for their babies or Kleenex tissues as quickly as they downshift their spending on travel and leisure. So there’s a “business moat” around KMB. And while 18x earnings, its current P/E multiple, is not especially cheap, this is a long-term-focused article, and passive income can be found here. And on a price basis, it is trading where it did back in 2016.
3. PepsiCo (PEP)
Business Overview
Another stock that needs no introduction, this global beverage and food brand includes Frito-Lay, Quaker Gatorade, Dr. Pepper, Ruffles and of course its original Pepsi brand. This Purchase-New York company has an extensive distribution network, including e-commerce.
Why PEP Is A Top Choice
Again, this is a case of placing a higher priority on long-term corporate stability than on current valuation. PEP’s yield is somewhat average for its sector, but nearly triple that of the S&P 500. Its price has stagnated along with much of its slow-moving sector, but part of that is the low-volatility nature of the businesses it is in. This is not exactly a high-flyer, unless we are talking about the caffeine boost from drinking a Pepsi or a Mountain Dew.
That said, PEP is making strides in the health beverage category, which potentially ups its profit margins in the years ahead. That and the size and strength of its profits and dividend-paying ability make this a solid part of this passive income group.
Bottom Line
The stock market’s recent euphoria has favored areas of the market other than the type of stocks highlighted here. However, not all investors wake up each day thinking about how much they can make trading tech stocks or crypto. For those folks, a passive income strategy that seeks stocks offering a more mundane, but historically sustainable path to earning income is still a valuable aspect of investing.
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