If you're on a quest to ensure a consistent flow of passive income to fulfill your retirement aspirations, there are indeed multiple avenues to achieve this. One familiar option is purchasing rental properties. However, the day-to-day obligations associated with owning rental properties often deter most retirees. On the other hand, building a truly passive income stream is likely best accomplished by investing in dividend-paying stocks and holding them over the long term. Companies like Pfizer (PFE 0.12%), PennantPark Floating Rate Capital (PFLT 0.27%), and Ares Capital (ARCC 0.18) offer exceptionally high yields, averaging 8.8% at current prices. An investment of $11,400 evenly distributed among them can generate $1,000 in annualized dividend income.

Dividend-Paying Stocks for a Secure Retirement

Pfizer

Income-seeking investors can rely on one thing: the ever-increasing demand for prescription drugs. As one of the largest drugmakers globally, Pfizer has raised its dividend payout for 15 consecutive years. At the current market prices, it provides a 6.7% yield. In 2023, Pfizer's share price took a significant hit due to the rapid decline in COVID-19 product sales. This decline has persisted, and some of its major revenue sources, such as the oral blood thinner Eliquis, are set to lose patent-protected exclusivity in the coming years. This will put pressure on the growth rate of Pfizer's dividend payout in the next decade. Nevertheless, with a plethora of new revenue streams on the horizon, the company is likely to continue raising its payout for another 15 years. Pfizer has made substantial investments with the proceeds from its COVID-19 vaccine success, and many of these investments are yielding positive results. During the first nine months of 2024, the sales of its COVID-19 vaccine plummeted by 66% to $2.0 billion. Despite this setback, the total revenue increased by 3% year over year. In 2023 alone, the FDA approved nine new drugs from Pfizer's innovative development pipeline. In the United States, where these new drugs are driving growth, product sales soared by 27% year over year during the first nine months of 2024.

PennantPark Floating Rate Capital

PennantPark Floating Rate Capital is a business development company (BDC) that lends to mid-sized businesses. For decades, American banks have been less willing to provide direct loans to businesses. Mid-sized businesses in need of capital are borrowing at interest rates that might surprise you. At the end of September, the average yield on debt investments in this BDC's portfolio was 11.5%. At the current market prices, PennantPark Floating Rate Capital offers an 11.1% yield and convenient monthly payments. Since it started paying dividends in 2011, the BDC has either raised or maintained its payout. The underwriting team of this BDC has an outstanding track record. As of the end of September, only two borrowers, accounting for 0.4% of its portfolio, were in non-accrual status.

Ares Capital

Ares Capital is the largest publicly traded BDC, with a portfolio more than 13 times larger than PennantPark's. At the current market prices, it offers an 8.7% yield and the confidence that comes with a highly experienced underwriting team. The average member of Ares Capital's investment committee has over 30 years of experience, and this expertise is evident. At the end of September, only 1.3% of this BDC's portfolio was in non-accrual status. If you're concerned about the future of the U.S. economy, it's challenging to find a more secure stock. Despite experiencing some serious economic downturns, Ares Capital boasts a cumulative net realized loss rate of 0% on its investments over the past two decades. When dividends are included, this stock has delivered an average annual return of 13% from 2004 to the present. Adding some shares to a diversified portfolio and holding them for the next 20 years seems like a prudent move for any investor.