Investing in high-yielding dividend stocks can be a great way to generate some passive income in 2025. Now is an excellent time to buy them because many higher-yielding stocks have sold off following the Federal Reserve’s recent decision to slow the pace of interest rate reductions next year. As a result, they now offer even higher dividend yields.

For example, Enbridge (ENB 0.05%) and W. P. Carey (WPC -0.58%) currently have dividend yields of around 6.4% following the recent dip in their share prices. That’s significantly higher than the S&P 500‘s (^GSPC -1.11%) dividend yield (around 1.2%). Because of that, a $1,000 investment split between these higher-yielding stocks could generate nearly $65 in dividend income next year. Here’s a closer look at what makes them appealing income options other than their higher yields.

A well-oiled income-producing machine

Enbridge has an exceptional record of paying dividends. The Canadian pipeline and utility company has paid dividends for nearly 70 years. Meanwhile, 2025 will be its 30th consecutive year of increasing its payment.

The company’s roughly 6.4%-yielding dividend is on a very sustainable foundation. Enbridge has a low-risk business model that produces very stable cash flow. About 98% of its earnings come from cost-of-service or contracted assets supported by creditworthy customers (more than 95% have investment-grade credit ratings). Enbridge’s cash flow is so predictable that it’s on track to achieve its financial guidance for the 19th year in a row.

Enbridge also has a conservative financial profile. It pays out 60% to 70% of its stable cash flow in dividends. That provides a sizable cushion and allows it to retain significant excess cash to fund expansion projects. The company also has an investment-grade credit rating backed by a leverage ratio trending toward the low end of its 4.5 to 5.0 times target range.

The energy company’s strong financial profile gives it billions of dollars in annual investment capacity. It currently has a significant backlog of organic expansion projects lined up. It has enough capacity to fund those projects and make bolt-on acquisitions as opportunities occur.

Enbridge believes these drivers will grow its cash flow per share by around 3% annually through 2026, and about 5% per year after that. Because of that, it should have plenty of fuel to continue increasing its dividend in the future.

Building an even more sustainable dividend stock

W. P. Carey had delivered a quarter-century of annual dividend increases until last year. However, the diversified real estate investment trust (REIT) reset its dividend after making the strategic decision to exit the troubled office sector. It now has a lower dividend payout ratio (70% to 75% target range) and a lower leverage ratio (currently 5.4x, putting it at the low end of its target in the mid-to-high 5x range). Because of that, it has more financial flexibility to acquire income-generating commercial real estate with better long-term rental growth prospects.

The REIT has been rebuilding its portfolio and dividend payment this year. It expects to acquire between $1.25 billion and $1.75 billion of properties in 2024 (its investment volume totaled $971.4 million by the end of September). W. P. Carey has primarily acquired industrial properties secured by long-term net leases that escalate rents at either a fixed annual rate or tied to inflation. As a result, they’ll provide it with a growing stream of stable rental income in 2025 and beyond.

W. P. Carey has ample financial flexibility to continue making new investments in the future. Those new additions to its portfolio and rent growth from its existing properties should boost its cash flow per share next year. That should enable the REIT to increase its dividend. It has already started rebuilding its payout following its reset in late 2023 by raising it every quarter this year.

High-quality income stocks

Enbridge and W. P. Carey own assets that generate very stable cash flow. They pay out a conservative portion of their steady income in dividends, enabling them to retain some money to invest in expanding their portfolios. They also have strong balance sheets.

Because of these features, they should be able to pay stable and growing dividends in 2025 and beyond. That makes them great income stocks to buy as we head into the new year.