Building a large portfolio of dividend-paying companies can pay off handsomely in retirement. A 4% average yield on a small investment may not earn much today, but as you keep saving and investing in top dividend stocks, you could build a portfolio that pays $20,000 in annual income on $500,000 over time.
The Dow Jones Industrial Average (^DJI 0.24%) is a great place to look for rock-solid companies that pay high yields. Here are two Dow Jones stocks to buy today to start building your future passive income stream.
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1. Home Depot
Despite a weak housing market, Home Depot (HD 0.67%) stock has held up well over the past year. This speaks to its massive scale and leading position in the home improvement market.
Higher interest rates continue to weigh on demand for home projects. Home Depot reported a total sales increase of 9% year over year in the first quarter, but it notched a slight decline in comparable-store sales.
Regardless of how the economy performs in the near term, Home Depot offers attractive upside for long-term shareholders. It serves a large $1 trillion addressable market, and Home Depot has only captured about 17% of that opportunity. The company is particularly focused on going after business from professional contractors, which represents a $525 billion opportunity.
Home Depot is also investing to diversify its supply chain from the impact of tariffs. It expects that no single country outside of the U.S. will represent more than 10% of its sourcing in the next 12 months.
Once the home improvement market recovers, Home Depot can deliver double-digit annual earnings growth around 10%, which is consistent with its previous 10-year history. Home Depot paid 61% of its earnings in dividends last year, providing plenty of room to sustain the dividend despite the weak sales environment.
The company has paid a dividend for 38 consecutive years, which covers quite a few bull-bear market cycles. It recently increased its quarterly dividend by 2% to $2.30, bringing its forward annual yield to 2.52%. An investor can expect to earn $126 in income over the next year from a $5,000 investment.
2. Verizon Communications
Investors have been attracted to Verizon Communications‘ (VZ -1.41%) high yield of more than 6%. The yield has gotten higher as the stock slid in recent years over increasing competition in the consumer wireless market, higher interest rates, and the company’s high debt burden. However, the stock bounced back in 2025, as Verizon continues to reduce its debt and generate robust cash flows to fund its dividend.
As Verizon lays the groundwork for stronger performance in its wireless and broadband businesses, management is guiding for full-year free cash flow between $17.5 billion and $18.5 billion. This is more than enough to cover the dividend, which represented just 56% of its free cash flow over the last year.
Leading telecom companies are attractive for dividend investors because of the recurring revenue from customers paying their monthly bills for phone and internet coverage. Verizon ended 2024 with more than 115 million consumer wireless retail connections and 10 million in broadband. This large base of customers helps the business generate consistent free cash flow to fund dividend payments.
AT&T has experienced momentum recently in its wireless business, which has put pressure on Verizon. It’s a very competitive industry, but Verizon’s large annual revenue and free cash flow provide plenty of resources to invest in technology and features to protect its competitive position. On that note, Verizon reported an increase in average revenue per account last quarter. This reflects healthy demand for add-on services in myPlan, where customers can sign up for entertainment, insurance, and other perks.
Verizon also just completed its acquisition of Frontier Communications for $20 billion, which will allow it to better compete with AT&T and T-Mobile in the broadband market. This comes after Verizon already reported gains in broadband market share in the first quarter.
With Verizon continuing to reduce its debt burden, sentiment on the stock could improve and lift the shares higher. Investors can count on Verizon‘s robust free cash flow to fund more dividend payments over the long term. It currently pays a quarterly dividend of $0.6775, bringing its forward yield to 6.2%. A $5,000 investment would earn $310 in income over the next 12 months.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.
