Key Points

Chevron has hiked its dividends for 38 straight years. Johnson & Johnson recently raised its dividend for the 63rd year in a row. Verizon has the longest dividend growth streak in the U.S. telecom sector. 10 stocks we like better than Chevron ›

The Dow Jones Industrial Average is an iconic stock market index. It tracks the performance of 30 of the country's most prominent publicly traded companies. Its components do get changed over time as new leaders rise and old ones fade, but as a rule, those that earn and keep a place in the Dow are some of the bluest of blue chip stocks.

Most of these companies pay dividends. Some of these payouts are currently very attractive if you want to generate passive income. Chevron (NYSE: CVX), Johnson & Johnson (NYSE: JNJ), andVerizon (NYSE: VZ) stand out as the top Dow stocks to buy for income in 2025 and beyond. Image source: Getty Images.

Lots of fuel to pay dividends

At its current share price, the dividend that Chevron pays now yields just over 5%. That's more than double the average yield of a Dow component, which was recently right below 2%.

The oil giant has an excellent track record on dividends: It has raised its payments for 38 straight years, a time frame that included multiple commodity cycles. Moreover, Chevron didn't just provide modest increases to keep its streak alive; it has delivered peer-leading dividend growth over the past decade.

Chevron should have no trouble continuing to grow its high-yielding dividend in the future. The company has the most resilient portfolio in the sector, with an industry-leading breakeven level of around $30 per barrel. It also has a strong balance sheet. Its leverage ratio is currently at 14%, which is below its 20% to 25% target range and at the low end of its peer group. Chevron management says it expects to boost its free cash flow by $9 billion by next year assuming oil averages $60 a barrel (around the current level) as it completes several growth projects. All of these factors suggest the company will have plenty of fuel to continue growing its dividend.

A healthy dividend stock

Johnson & Johnson's dividend at its current share price yields around 3.4%. The healthcare giant recently hiked its payout by nearly 5%, extending its dividend growth streak to 63 straight years. That kept the company in the elite group of Dividend Kings, companies with 50 or more years of annual dividend increases.

Johnson & Johnson has one of the healthiest financial profiles in the world. It's one of just two companies with an AAA bond rating, which is higher than the U.S. government. It ended the first quarter with a mere $13.5 billion of net debt ($38.8 billion of cash and $52.3 billion of debt) -- a pittance for a healthcare behemoth with a $370 billion market cap.

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Last year, Johnson & Johnson generated $20 billion in free cash flow, a $1.6 billion increase from the prior year. That easily covered its $11.8 billion dividend outlay. The company produced that robust free cash flow even though it invested more than $17 billion in research and development (R&D), making it one of the top R&D spenders across all industries. The company's financial strength also enabled it to invest over $30 billion in inorganic growth initiatives like acquisitions in the past year. Its pattern of heavy investments in pursuit of growth should result in rising cash flows that will enable it to keep increasing its dividend regularly.

A prodigious passive income stream

Verizon currently clocks in with the highest dividend yield in the Dow Jones at 6.2%. The telecom giant produces lots of recurring revenue to support that prodigious payout. Last year, Verizon generated $36.9 billion in cash flow from operations, more than enough to cover its capital expenditures ($17.1 billion) and dividend payment ($11.2 billion). The company used its excess free cash flow to strengthen its already solid balance sheet.

It's putting some of that balance sheet strength to use to buy Frontier Communications in a $20 billion all-cash deal that should close in the next year. That acquisition will bolster its fiber network and should deliver at least $500 million in annual cost savings. Verizon also continues to invest heavily in organic capital projects to maintain and expand its broadband and mobile networks. These investments should grow the company's earnings and cash flow in the future.

Verizon's increasing earnings should enable it to continue raising its dividend. It delivered its 18th consecutive annual dividend increase late last year, a move that maintained the longest current payout-hiking streak in the U.S. telecom sector.

Blue chip dividend stocks

The Dow Jones Industrial Index can be a great place for investors to look for high-quality dividend stocks. Chevron, Johnson & Johnson, and Verizon have certainly been elite dividend payers over the years. With yields that are well above the market average and more dividend growth ahead, all three are great Dow stocks to buy for passive income in 2025 and beyond.

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Matt DiLallo has positions in Chevron, Johnson & Johnson, and Verizon Communications. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends Johnson & Johnson and Verizon Communications. The Motley Fool has a disclosure policy.

Generating Passive Income: 3 Top Dow Dividend Stocks to Buy for 2025 and Beyond was originally published by The Motley Fool

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